Hope springs eternal

By Bruce Piper

The sense of despair and despondency after the release of the Federal Budget last week was palpable across the industry, with AFTA’s submission and the nationwide mobilisation program apparently resulting in no recognition whatsoever that the current border closures are a complete impediment to the ability for the sector to recover. Anticipation was high, particularly based on the timeline laid out by AFTA CEO Darren Rudd when the proposal was lodged, with the industry heavily focused on Budget night as the moment that our travails would be acknowledged by Treasurer Josh Frydenberg.

However instead of sector-specific support, the Budget only covered economy-wide measures, most of which will do little to help the travel industry. Tax cuts are all well and good for businesses and individuals that are actually paying tax because they have an income but that’s generally not the case in the industry at the moment. There’s no plan whatsoever to extend JobKeeper, and on top of that, in a double whammy the Budget papers also confirmed the Government’s expectations that widespread travel will not resume until a COVID-19 vaccine becomes widely available in a national immunisation program – which, perhaps extremely optimistically, is forecast to be implemented in the fourth quarter of 2021.

Expectations that help would be forthcoming in the Budget were also reinforced when AFTA posted an image on social media during Frydenberg’s parliamentary speech on the evening of Tuesday 6th October, indicating that Rudd and KPMG NSW Chairman Doug Ferguson were “awaiting their call with the Prime Minister at 8.30pm”. Anyone who saw the post would have assumed that good news was in the offing, but at this stage, more than a week later, nothing has been revealed.

Darren Rudd awaiting a call from the Prime Minister

The lack of progress, combined with repeated hints from AFTA that something is coming soon, raises the question of whether officials are just stringing the industry along. The day following the Budget delivery, Rudd was in Canberra having been summoned to a meeting with the Prime Minister’s office, which again had us on tenterhooks about a possible announcement. But the only outcome of that meeting was an assurance that the “door was still open” and that the AFTA bid for $125 million in industry funding was one of just a few still under consideration by the Government.

The optimistic tone continues this week, with affirmations that AFTA is in “detailed, data-driven dialogue” with officials and Rudd participating in ongoing meetings in Canberra, based on an updated package of financial information. We’ve been told that the machinery of government moves very slowly, and the industry continues to be urged to put its case to local MPs who certainly appear to be now much more aware than previously of what the sector is going through.

However perhaps more concerning than the perceived lack of progress was AFTA’s assessment of the wider measures in the Budget, and particularly the initial welcoming of carry-back provisions which allow companies incurring a loss in the current year to obtain an immediate cash-flow boost by balancing out tax payments from previous profitable periods. “AFTA welcomes the Government’s decision to enact loss carry-back provisions to allow current year losses to be carried back. This was a key recommendation in the AFTA pre-Budget submission,” the Federation noted in a statement issued after the Budget was released. However the following day a further update from Darren Rudd to members noted that after his meeting with the PM’s office “they appreciate the loss carry back may not be good for all”. In order to access any such cash-flow boost, businesses need to show a current year loss, which for most industry participants is unlikely given that the first nine months of 2019/20 saw the industry in a boom. Unlike many other industries, travel agents do not have huge reserves to fund losses, and are unlikely (and unwise) to risk their own money on investing in their businesses in the current environment, so the carry-back provisions are in most cases completely irrelevant. So if that’s the case, the question must be asked why was it such a “key recommendation” in the AFTA pre-Budget submission?

Unfortunately I fear that the current situation reflects the existential threat that the Australian travel industry as we know it faces.

Even if the $125 million asked from the Government is forthcoming, if international borders remain closed according to the Budget timeline this money will just be a drop in the bucket. The reality is that the proposed average $40,000 grant that would come to viable travel agencies, tour operators and wholesalers as the result of the Federation’s submission – AFTA members or not – will simply pay a few month’s rent, or some staff redundancies, rather than paving the way for a return to normality. On top of that is the unsaid but certain reality that AFTA’s own existence is on the line, with a significant amount under the funding package required to simply keep the Federation operating in its own current zero-revenue environment.

Don’t get me wrong, the efforts that the industry, Darren Rudd and his team have gone to are amazing. In a short period of time the individual efforts of agents to raise their plight with MPs has achieved unprecedented visibility for the industry.

Travel agents have become part of the ongoing discourse in Canberra and each State parliament, and there’s definitely plenty of sympathy and much more understanding of what we’ve been going through. But pragmatically, does the Government want to prop up what they still clearly believe is a declining industry?

As a number of commentators have noted previously, the Australian travel industry is going to look completely different when this is all over. Many will survive, many will thrive, but unfortunately many will not. It is clear that those who are in a position to ride out the storm will benefit from an exuberant explosion in travel when borders reopen, and we all look forward to getting to the other side of this. But we shouldn’t have unrealistic expectations that the Government will save our collective bacon. The truth is that the only thing that’s going to produce a recovery and support the thousands of industry jobs at risk is a change to border policies or a COVID-19 breakthrough. We all have to decide how long we are prepared to wait for that to happen.

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