Commercial feasibility of flights to remote islands

Background

For many island communities in the Torres Straits, air services provide a vital link between themselves and the services and opportunities available on Thursday Island and the mainland. These vital services are mostly provided on a commercial basis by a mix of RPT and charter services operating in often challenging environment.

One of the challenges in operating into and out of some of the islands in the Torres Strait is that runways can be very short (the shortest commercial runway in Australia is the Torres Straits) with the ocean at either end. This can raise safety concerns and, as a result, CASA, the national safety regulator suspended operations of the incumbent operator to two islands in 2022. To ensure service continuity to the communities on these islands, the State Government contracted another operator to provide services. When the contract with this second operator neared the end of its term, the State Government engaged NineSquared to provide advice on the likely impact on service levels to the islands in the event the contract, and the government subsidy that accompanied it, expired

Our role

NineSquared reviewed the existing and previous aviation market in the Torres Straits with particular focus on the islands where services had been suspended. The review included examining:

• Current market participants in the Torres Straits and Cape York regions to determine potential entrants
• Documenting the operating environment on the relevant islands
• Reviewing existing aircraft types that were available to these market participants and assessing their suitability for providing the services required to the islands
• Analysing commercial and charter flight data to identify market share, operating and route strategies and market position of operators as well as estimating demand for services from island residents and others.
• Assessing the extent to which the supply of services did or was likely to meet the demand for air travel to and from the islands
• Assessing the feasibility and likelihood of new entry into the market if and when the existing contracting arrangements and subsidies were ended, and
• Assessing the potential impact on fares in the event the subsidy ended.

Project outcomes

NineSquared provided a report documenting our opinion, supported by the evidence base developed through the engagement, as to the financial and commercial feasibility of flights to the two islands. As a result of the report, the client made recommendations to not renew the contracting arrangements and subsidy. The island communities continue to receive air services that are once again provided on a fully commercial basis without subsidy by the State Government.

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