The parlous state of competition in Australia’s airline industry has been laid bare in the report by the Senate inquiry into the Albanese government’s decision to deny Qatar Airways a doubling of its 28 flights a week into Australia.
And as Greens Senator Penny Allman-Payne said in her welcome dissenting report, it’s not just changes to allow better competition that are needed to fix all the problems the sector — and the countless millions of people that use it — are experiencing.
The committee believes the government should immediately review the decision. It also said that airfare price monitoring by the Australian Competition and Consumer Commission (ACCC) — for which funding was cut by the government in June — should be reinstated and that the competition watchdog should launch an investigation into anti-competitive behaviour in the domestic aviation market.
It also recommended, as previously advocated by Crikey, that the government should implement consumer protections for significant delays, cancellations, lost baggage and the devaluation of loyalty programs — many of which are available to consumers in North America, the EU and elsewhere.
And, finally, the prospect of breaking up Qantas has been canvassed. Forcing it to divest Jetstar would be a quick route to better competition — and a potential win for shareholders. The inquiry found that competition reforms could include “potential divestiture powers to remedy any misuse of market power”. Former ACCC chair Allan Fels said he was “strongly in favour” of divestiture powers: “I believe it would have a very big effect on behaviour, including by Qantas.”
It’s worth noting that the inquiry — and so the report — had a gaping hole. Everyone remains in the dark as to what conversations took place between Qantas and the federal government because neither Transport Minister Catherine King nor Qantas’ departed chief executive Alan Joyce would appear before the committee. It seems Joyce is so busy whooping it up on his millions in Europe he has no time for even a video conference. Shame on him.
“Despite lengthy questioning of the Qantas chair and new chief executive officer, there were questions unable to be satisfactorily answered for which the evidence suggests Mr Joyce will likely hold the answers,” the report said.
Committee chair Senator Bridget McKenzie — who may have finally found her calling via a sparkling performance at the hearings — said the government “sought to prevent the committee from fully investigating the reasons why additional Qatar Airways flights were rejected by refusing to release documents and placing a gag on the infrastructure and foreign affairs departments”.
She added: “The committee heard evidence that Australians could have been enjoying cheaper flights to Europe and the Middle East as early as April this year had the government approved additional Qatar Airways flights, and that Turkish Airlines had planned to offer additional flights in time for families to reunite overseas this Christmas.”
In the Greens’ dissenting report, Allman-Payne wrote: “Customers and Qantas’ own employees have been paying the price for Qantas’ ‘dominant firm’ status, through a series of outcomes Australian consumers are all too familiar with: Qantas sacked thousands of workers during the pandemic, despite receiving $2.7 billion in government assistance. The High Court has found that 1,700 of those workers were illegally sacked and their jobs outsourced. The ACCC is taking legal action against Qantas for selling tickets on flights that had already been cancelled. Qantas was the ACCC’s most complained about company two years in a row.
“Despite this, Qantas posted a record $2.4 billion profit last year, and their former CEO Alan Joyce’s final pay cheque was $21.4 million. In this period Qantas’ domestic fares increased by over 20% on pre-pandemic prices and international fares increased by over 50%.
“The new CEO and continued [sic] board chair gave evidence to this inquiry that showed no indication these practices would not continue. The new CEO defended the size of the former CEO’s pay, and the board chair defended the illegal outsourcing of workers, with no indications of remorse or a desire to change the approach Qantas has taken to date.”
Having more international flights into and out of Australia is a no-brainer as fares remain far higher than pre-COVID. It would improve things on European routes where the Qantas-Emirates alliance hold about a 53% market share — the vast piece of which (91 out of 113 weekly flights — a statistic Hudson conveniently could not remember at the committee hearing) is actually Emirates business. Qantas simply clips a no-risk ticket without the pesky business of having to fly planes.
The belated submission by Qantas, which landed on Friday only after being demanded by McKenzie, darkly warned the government against reviewing the decision, citing all sorts of mumbo jumbo about bilateral services agreements — all of which are in the purview of governments. This is despite Hudson admitting to the inquiry that Qantas made its pleading with the government a year ago before travel had all but returned to normal on the basis that it would — at that time — have “distorted the market”. Now that the situation has changed, Qantas has found other reasons to not want more competition.
The Labor dissent was a bit whiny and unconstructive, mainly because it had to toe the party line. Labor Senator Tony Sheldon, a former Qantas union rep, has been a strong voice in the government against the airline’s power and must be frustrated.
“Indeed, throughout five public hearings and nearly 150 written submissions, this inquiry has not revealed any information that was not already on the public record before the inquiry began,” Labor senators wrote. Fair enough, but so far not much is being done — not least by the government.
Hudson, of course, has more immediate problems on her hands than the slow-moving wheels of government. Today and tomorrow her industrial relations team are holding meetings with the Australian Federation of Air Pilots, the union that represents disgruntled pilots at three of the airline’s subsidiaries –Perth-based Network Aviation, Sydney-based Eastern Airlines and Brisbane-based Sunstate — who fly QantasLink as well as vital FIFO charter services in the west.
On Friday the main Qantas union, the Australian and International Pilots Association — which does not have much coverage in the regional subsidiaries — also said it would not support the Qantas Enterprise agreement that pays pilots 40% less than mainline pilots flying similar aircraft.
No-one on the pilot side is expecting much to happen as Qantas appears to be remaining firm and continuing its hard-line IR approach. This is likely to result in further industrial action which Qantas and the entire industry are watching — a situation that is more likely than at any time since the mass domestic pilots strike of 1989. Having backed Joyce’s strategy — and won the top job because of this — Hudson finds herself between a rock and a hard place barely a month into the job.
The company is also spreading misinformation, some of which is being swallowed by the mainstream media, about what the pilots and unions are demanding — a 50% pay rise being the most egregious example, unions say.
The external heat is rising on the threat of more competition and Hudson has a very serious internal IR problem. As well, her battered fleet and understaffed resources maintenance division mean that delays and cancellations continue to anger her customers every day. To say that the bean counter-turned boss is experiencing a baptism of fire is some understatement.
