ACCC seeks airport reforms to end Qantas-Virgin duopoly
The consumer watchdog says the pandemic downturn in air travel is an opportunity to encourage more competition in Australian skies
By David Flynn, January 15 2021
Could COVID-19 provide an opportunity to reshape competition among domestic airlines and make it easier for challengers to take on the established duopoly of Qantas and Virgin Australia?
That's the hope of the Australian Competition and Consumer Commission, which is lobbying for changes in how airports assign take-off and landing slots.
In its submission to a Senate inquiry into the future of Australia's aviation sector, ACCC Chair Rod Sims noted that "access to slots at Sydney Airport is a key barrier to entry and expansion in Australian air passenger services markets."
Airport curfews and physical limitations on runway movements mean that a number of Australian airport are "slot-constrained", which makes those slots a precious asset for airlines.
And under the current rules, slots allocated to an airline remain with them indefinitely.
'Slot hoarding' stymies competition
However, the consumer watchdog said the "hoarding of airport slots" reduces rivalry between airlines which would otherwise "encourage cheaper airfares, more favourable terms and conditions, better quality inflight services, more frequent services and a broader network reach."
The ACCC flagged concerns over airlines scheduling flights "for the purpose of retaining a slot but with no real intention of operating the flight, and likely cancelling the flight close to its schedule departure time... to prevent a competitor from accessing those slots."
Sydney Airport was singled out in the ACCC's submission as an example of a heavily slot-constrained airport, especially during peak early morning and late afternoon periods of a weekday.
But with domestic flying on the once-crowded Sydney-Melbourne-Brisbane 'triangle' now at an all-time low due to ongoing border closures, and international flights pared to almost zero, the ACCC suggests this is the best time to rethink slot management.
It has suggested temporarily reallocating unused international slots for domestic use, to create a short-term "pandemic recovery pool" of slots, while airlines would be fined for not using allocated slots as an incentive for them to return slots they don't really need.
Slots under the microscope
Seperate to the Senate inquiry, in November 2020 the Federal Government released a "Sydney Airport demand-management discussion paper" to examine if changes are needed to both the slot scheme and the airport's current cap of 80 take-offs and landings every hour.
The fresh focus on airport slots comes as Regional Express prepares to challenge Qantas and Virgin on the east coast triangle from March 1, with fares starting at $79 for economy and $299 in business class.
Although Rex's startup fleet is a mere six Boeing 737 jets – all of which were formerly leased to Virgin Australia – the airline hopes to build up its network to cover "all the other capital cities and major cities in Australia."
"By the end of 2022... Rex’s ambition is to be a sizeable domestic airline operator with a fleet of 30 or maybe 40, maybe even more narrow-bodied single-aisle aircraft operating on the domestic network around Australia," Rex Deputy Chairman John Sharp says.
That expansion would of course rely on the availability of many more slots, not only at its Sydney hub but at other domestic airports.
However, Qantas Group CEO Alan Joyce believes there's simply no room in Australia's skies for a third major airline, with either Virgin or Rex set for a fall.
"My personal view is that this market has never sustained three airline groups and it probably won’t into the future," he said at this week's Reuters Next online forum.
"You can be guaranteed that Qantas will be one of them – it’s who else is going to be in the market place post this, and into the future is going to be interesting."
Read more: Can Rex win the business class battle against Qantas, Virgin?
David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
Qantas - Qantas Frequent Flyer
14 Oct 2012
Total posts 46
The ACCC needs to get a dose of reality and stop "hoping"... Rod Simms is living in a fantasy land... it's not going to happen.
Virgin Australia - Velocity Rewards
24 Jan 2018
Total posts 755
Dear Mr Simms, can I share with you some confidential information: we live on this dirty great big island nation with a land mass of 7.6 millions SqKms and population of only 25 million.
I believe its what you economists (not desk-jockeys, 'economists') would call it a 'small market' covering a big footprint
Contrast these facts with the UK, a small island nation with a land mass of less than 240,000 Sqkms, but a population of over 68 million people and a very highly developed rail network (even before HS2). That's what's known as a large market on a small footprint.
You see Roddy, you've never operated an airline, nor worked in/for one, have you. Please tread very carefully, that's all I ask. Investigate by all means, but tread . . . very . . . carefully.
Virgin Australia - Velocity Rewards
15 Aug 2018
Total posts 6
Never a truer word said,good sir!
Qantas - Qantas Frequent Flyer
22 Nov 2019
Total posts 85
Get stuck in Rodney, Alan needs a prod up the jacksy and Silk Air is chomping at the bit to get a slice of the golden traingle
20 Oct 2015
Total posts 245
What? Silk Air? Mate, NO international airline is allowed to do domestic flights, it would take a lot more than just this Govt review to change that rule, and if international airlines were permitted to fly on the golden triangle it would be the death knell for Australian airlines, because the likes of Silk Air which will of course soon be Singapore Airlines have lower labour costs and have also received Government payments to keep them going, so the market would be over-crowded, fares would drop and there could almost be that 'race to the bottom', and in the end we would end up with Qantas and Virgin and Rex all dramatically weakend. No thanks, let's just let the Aussie airlines play this one out. Still more than enough competition between Qantas, Virgin, Rex and Jetstar for the limited number of flyers we have.
Qantas - Qantas Frequent Flyer
22 Nov 2019
Total posts 85
The times, they are a changing rapidly sir.
17 Oct 2017
Total posts 22
You think fares would drop... how is that bad?
13 May 2020
Total posts 827
Bad for qantas with highest costs.
Qantas - Qantas Frequent Flyer
04 Mar 2014
Total posts 204
Should really be a use it or loose it arrangement
13 May 2020
Total posts 827
Don't think Rex will be rushing to operate anything but triangle flights, which is where almost all profits are domestically
Qantas - Qantas Frequent Flyer
11 Oct 2014
Total posts 691
It really doesn't matter whether Rex will be rushing into anything. From my point of view, here are some relevant (and often forgotten or ignored) points that should be considered:
Oh, and while you're about looking at responsibilities ASIC .. perhaps a comprehensive, user-friendly Aviation Passenger Charter wouldn't go astray? Er, just like the ones in the UK and Europe which insist on airlines like British Airways refunding cancelled flights within seven (7) days. Or guaranteeing some basic Passenger Rights. You know, like the ones we don't have here in Australia.
13 May 2020
Total posts 827
agree with much of above, but airlines can't afford to refund anyone ever.
Qantas - Qantas Frequent Flyer
22 Nov 2019
Total posts 85
Alan would choke on his morning glass of Bolly if us Aussie passengers had any charter rights in Australia :)
20 Jun 2020
Total posts 33
This is what happens when QF doesn't bribe regulators with chairman's lounge memberships
Qantas - Qantas Frequent Flyer
28 Oct 2011
Total posts 467
Why did you not mention VA and the memberships to The Lounge offered to the very same people?
20 Jun 2020
Total posts 33
Last time I checked the club is no longer in operation
Qantas - Qantas Frequent Flyer
04 Nov 2017
Total posts 343
Silk Air won't be existing for much longer as they are being absorbed into SQ mainline.
Going by SQ's past track record, SQ having a "4th" go at the Australian market, if at all, won't be easy.
With SQ's track record through their losses in the Australian domestic market through their past stakes in the Air New Zealand group (including Ansett), wholly owning Tiger Airways Australia and their ill-fated stake in Virgin Australia, people would think SQ would have learnt by now.
Qantas - Qantas Frequent Flyer
11 Oct 2014
Total posts 691
Silk Air was only used as an example, DanV. To illustrate the point, you could use any foreign carrier you wish.
I do tend to agree with your sentiments regarding SQ's abysmal record in trying to 'shake up' the Australian market - but I'm happy for them to fail as many times as they wish.
13 May 2020
Total posts 827
last time I looked QF only 51% Australian, VA runs by yanks & Rex run by Singaporeans.
16 Jan 2021
Total posts 1
So how do you want to level the playing field. Restrict all carriers to from offering a level of service greater than ... say, Jet Star?
From my experience, booking with Qantas and/or Virgin takes all the guess work out of it. If you want to compete with them ... provide a better experience.
Qantas - Qantas Frequent Flyer
11 Oct 2014
Total posts 691
I'm not the regulator, TMann - that is the ACCC's job. Irrespective, there are some fundamental, basic tenets in my original post that are the building blocks of basic competition within the industry.
It is a lot easier to regulate an oligopoly than it is to regulate a monopoly or a duopoly.
There's also a bit of a tired old argument that Australia can barely support two separate carriers. That's a bit of a misnomer, since every time a third (or more) competitor arises, one of the two dominant players buys or absorbs the third challenger. Think about the fates of Kendall, Hazelton, Butler, Compass (1 and 2), Tiger etc. They all ended up in the same position. Hmm, perhaps we should look at the regulatory environment? But .. let's start with some basic, easier ones:
In this group, you could include Gate Allocation - should a 'use it or lose it' policy exist? Another point - where a new entrant appears, should an automatic allocation of gates (based on comparative percentages) exist? Since airline slots aren't a saleable item at Australian airports, the answer tends to sway to a natural yes.
And, as mentioned up thread - some basic passenger protection policies wouldn't go astray. No other industry gets to keep its customers revenue when a service or product is not provided. Why should airlines be any different? If you're an airline and you want 100% filled capacity, you have a whole raft of tricks to achieve or maximise revenue management. At worst case, you could reintroduce 'Mystery fares' or sub-load 'last-minute fares'. Easy .. isn't it?
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