E-commerce to double to $50bn, says Australia Post chief Christine Holgate

Australia Post chief executive Christine Holgate says the local e-commerce market will double in size over the next five years.

Christine Holgate and Alan Joyce have unveiled a new seven-year agreement

Australia Post chief executive Christine Holgate says the local e-commerce market will double in size over the next five years to be worth $50 billion, underpinning the growth of an expanded $1bn domestic and international airfreight agreement with long-term partner Qantas.

Ms Holgate and Qantas chief executive Alan Joyce yesterday unveiled the new seven-year agreement giving Australia Post customers access to Qantas Freight’s dedicated freighter aircraft and priority access to the cargo space on up to 1500 Qantas and Jetstar passenger flights to over 110 destinations each day, in addition to space on partner airlines globally.

The deal will also see the introduction in October next year of up to three Airbus A321P2Fs (passenger to freighter) to the Australia Post freighter network. Qantas will be the first airline in the world to operate the A321 as a freighter aircraft.

“This is a growing contract, so it could be worth a hell of a lot more than the ($1bn),’’ Mr Joyce said yesterday. “We are committing to at least three of these A321 aircraft — it could be a lot more as this grows.”

Each A321P2F aircraft will add nearly 50 per cent more capacity — or an additional nine tonnes — compared with existing Boeing 737 freighters. The value of e-commerce in Australia grew 24 per cent over calendar 2018.

“We have seen no slowing down in that. We were having days in May and June that we haven’t seen outside of December before — $1 million parcel days,’’ Ms Holgate said.

She said last year Australia Post handled 40 million parcels during December and expected to exceed that number this year.

“The e-commerce market could double in Australia over the next five years to $50bn, from the current $25bn. Online is 10 per cent of the market. We believe it will get to 20 per cent by 2025.”

Eighty per cent of the freight volume in the Qantas deal is parcels. Australia Post still moves two billion letters a year.

But Ms Holgate confirmed volumes in the once staple business of the enterprise had continued on their “worrying trend”, falling a further 10 per cent over the past year.

She said Australian volumes were holding up better than other countries such as New Zealand, where they were falling 15 per cent a year.

In February Australia Post reported a 44.5 per cent fall in first-half net profit to $118m, struck on flat revenue of $3.6bn.

A 10 per cent increase in revenue in the $1.9bn parcels business failed to offset a 10 per cent revenue decline in the core $1.1bn letters business, which stripped $102m from profits.

The partnership between Australia Post and Qantas dates back to 1922. In 2012 Qantas took full control of air cargo business Australian Air Express after an asset-swap deal that involved Australia Post buying the airline’s half share of road freight business Star Track Express.

Net freight revenue for Qantas reached $525m in the first half of 2019, up 15 per cent on a year ago.

Mr Joyce said the airline’s freight business had “seen some really good growth because of what we are seeing in the parcel business”.

Qantas Freight executive manager Paul Jones said the airline was seeing double-digit growth on its freight network year on year.

But Mr Joyce said Qantas continued to see a “mixed” domestic economy.

“It is very much the case that in the telecommunications and financial services sectors we have seen a significant pullback. Similarly in construction,’’ he said. The airline announces its annual results later this month.

On the international front, he said: “For first time since I’ve been CEO we have seen negative ­capacity growth in the past six months,’’

He put the slump down to volatility in the oil price and international uncertainty.