Kingscote Airport Business Case - Kangaroo Island Council - SA ...

Kangaroo Island Airport Upgrade Business Case
likely also be accompanied by increased demand from international visitors, given the
significant international connections offered at Melbourne and Sydney airports.
Increases in air travel tourism to Kangaroo Island can easily be accommodated through
the vast natural landscapes of the Island, however investment in additional
accommodation will be needed, and projects that respond to this opportunity have
been considered further below.
Travel access
Kangaroo Island’s Tourism Destination Action Plan 2012-2014 considers ‘ease and
cost of access’ to be the Island’s number one (1) issue to be addressed to grow
tourism. 18 Similarly, the South Australia’s Economic Development Board report to
Government, ‘Paradise girt by sea – Sustainable economic & social development for
Kangaroo Island’, states that the current state of the airport stands in the way of a
doubling of tourist number to Kangaroo Island within a decade and that it is
consequently critical that if the target is to be achieved, that the airport runway is
lengthened and strengthened to accommodate a broader range of aircraft types and
capacities 19 , including those that might operate additional services alongside the
existing Saab 340 based service, and those that would be available to replace the
Saab 340 when they retire.
A move to larger sized planes is almost certainly likely to see a requirement of security
checks for passengers similar to that at main Australian airports in order to comply with
national security standards in civil aviation. To achieve this, there will need to be a
terminal upgrade to provide such facilities.
Competition
There is only one service provider supplying commercial air services to Kangaroo
Island. Kangaroo Island suffers a significant transport cost disadvantage when
compared to mainland counterparts. The cost of doing business on the Island is seen
as the most significant impediment to tourism, business retention and growth. In a
recent study by Pacific Aviation Consulting, (PAC) they noted that air passenger
demand and seat supply are linked in complex ways – in a monopoly market,
incentives (in the form of higher prices and higher profits due to relatively inelastic
demand) exist for airlines to provide less capacity than would otherwise be demanded
in a market equilibrium situation. Similarly, the added seat supply provided by a new
entrant can have a stimulatory effect on demand, pushing market equilibrium demand
higher than would otherwise be the case in a single‐player market. PAC suggest that
without additional service providers, the current downward trend in air travel is likely to
continue due to the incumbent’s higher cost base (resulting in higher fares), limited
network connectivity to major source markets and monopoly position. PAC also
confirmed that if competition is to occur it will most likely occur with aircraft too large
and heavy for Kingscote’s current aero based infrastructure.
The Council also considers that if a new Kangaroo Island service from Melbourne or
Sydney were to be introduced, the carrier may consider a regional approach to the
18 South Australian Tourism Commission & Tourism Kangaroo Island (with the involvement of Kangaroo
Island Council and RDA Adelaide Hills Fleurieu and Kangaroo Island, 2012, Kangaroo Island Destination
Action Plan. Accessed at < http://www.tourism.sa.gov.au/assets/documents/About%20SATC/kangarooisland-destination-action-plan.pdf>
19 South Australian Economic Development Board, 2011, Paradise Girt by Sea – Sustainable economic &
social development for Kangaroo Island. Accessed at
23
May 2013