Hope springs eternal - but questions remain

Non-viable businesses have the ability to destabilise the market by creating consumer expectations in relation to pricing that may be below cost

Ben Caplan is MD of Sydneybased Wall Street Travel. Got an opinion to share? Let us know in up to 400 words via email to feedback@traveldaily.com.au.

LAST week I participated in Dan Tehan’s Zoom call. I came away encouraged and full of hope that I would soon be returning from the travel industry’s long hibernation - the end is in sight.

That said, no exact date was provided, yet based on what was discussed my expectation is opening day will be as early as mid to late Oct or no later than the end of Nov - subject to vaccination targets being met.

As NSW heads toward the National Cabinet’s double vaccinated number of 80%, this will allow international travel to recommence.

That said, it is now appropriate that the Australian travel industry develops a formula to determine business viability/survivability going forward.

A checklist needs to be created, which is applicable no matter what size a business is/was. This can be devised by an accountant and must include, wages, rent, and various insurances etc.

It needs to be a guide to determine how much capital a business should have available to reopen its doors to trade.

The industry is basically starting from zero. Yes, many businesses may expect past clients to return, whether they are in the retail sector or in the corporate space.

As they say “timing is everything”: what does that mean? Initially we simply have no basis to determine when our loyal clients will return and at what volume.

Based on two articles in The Australian last weekend, the American experience is that corporate travel had an initial flurry and is now more subdued and a number of carriers are now not expecting to be profitable over the current and next quarter.

Even the airlines are finding it hard to find enough paying passengers to trade profitably in the current environment despite having an open economy and much more freedom of movement in the USA.

This means businesses must have access to enough cash to survive and thrive in the postCOVID-19 economy.

If NSW opens in late Oct or Nov, will potential leisure travellers be booking getaways for the forthcoming summer break, or will they be waiting until the northern hemisphere warmer weather to travel?

So when do you advise your clients that you are back? How many of your stood down staff are still available to return and on what basis will they be paid?

More importantly the checklist needs to include a suggested guide as to how much capital is required to restart.

How is this determined? AFTA has all members’ financials via ATAS. To ensure survivability and consumer goodwill when trading recommences, it is paramount that businesses that are not financially viable are discouraged from trading.

It will be a tough environment and businesses do not need to compete in such a climate with possibly subdued demand against undercapitalised businesses that may choose to sell below cost to simply create cash flows and then go bust.

Yet these non-viable businesses have the ability to destabilise the market by creating consumer expectations in relation to pricing that may be below cost.

Plus, AFTA may need to remind members that employees need to be paid the minimum award salary based on days worked, not on what may be agreed between employer and employee because resources have been exhausted.

No one wants Fair Work calling, due to disgruntled employees realising their pay is wrong.

The Australian travel industry is still going through COVID-19; it may be time for many to exit the industry and those that stay must be aware of what is ahead and what the minimum that will be required to be viable.

Even then that is not a guarantee of survival or success.

We need guidance and a plan to survive and thrive.