The head of the competition watchdog has called for a fresh mandate from the Albanese government to monitor the airline industry and help new entrants compete with established players Qantas and Virgin.
The chair of the Australian Competition and Consumer Commission, Gina Cass-Gottlieb, said the regulator sees “a case” for a mandate to look into competition, prices and industry practices after an earlier direction expired in June.
Cass-Gottlieb’s call follows a Senate inquiry hearing this week in which industry and airline heads, including Virgin Australia’s Jayne Hrdlicka, backed a revamped watchdog monitoring program – standing in contrast to Qantas, which did not support a renewed probe.
In June 2020, the Morrison government directed the ACCC to monitor the domestic industry for anti-competitive behaviour at a time of crisis, following Virgin Australia entering administration and the loss of budget carrier Tiger, as well as broader disruptions from pandemic border closures threatening other airlines operations.
Despite calls for an extension from within the aviation sector and consumer advocates concerned about price gouging, the ACCC’s domestic airline monitoring program concluded in June.
Since then, concerns about anti-competitive practices such as slot hoarding have only grown, with the ACCC launching court action against Qantas for allegedly advertising and selling tickets for more than 8,000 flights that it had already cancelled in its system.
Asked if the ACCC would like monitoring of the aviation industry to be renewed, Cass-Gottlieb told Guardian Australia: “That original direction had a specific focus on the impact of Covid.
“We do see a case for reinstatement of a direction that would look to the status of competition, and survey prices, costs and the manner of operations.”
Cass-Gottlieb argued this should be done “both to meet customer service expectations but also in terms of enabling the success of entry and expansion of recent entrants, including Rex and Bonza”, in order to open up more competition.
In its final monitoring report in June, the ACCC said a further direction “would provide continued transparency and scrutiny of the industry at a time when new and expanding airlines are still trying to establish themselves”.
Cass-Gottlieb said at the time that while the regulator retains the same powers for aviation as it does to police all industries, it would need to have reason to believe a contravention of law had occurred to compel airlines to provide certain information.
“Domestic aviation is one of the most concentrated industries in Australia, barring only natural monopolies such as electricity grids and rail networks,” she said in June.
“Without a real threat of losing passengers to other airlines, the Qantas and Virgin Australia airline groups have had less incentive to offer attractive air fares, develop more direct routes, operate more reliable services and invest in systems to provide high levels of customer service.
“Rex’s expansion on to major intercity routes and Bonza’s launch have been positive developments for competition, but their share of the market is small and there are barriers to growth.”
Industry practices and lack of competition have been explored in Senate committee hearings inquiring into the Albanese government’s decision to reject Qatar Airways’ application for extra flights into major Australian airports, a decision that benefited Qantas.
On Wednesday the former ACCC chair Rod Sims told the inquiry legislation governing access to Sydney airport was “extremely problematic” and “frankly ridiculous” in benefiting Qantas and Virgin.
Sims, appearing before the Senate select committee on bilateral air service agreements, stressed the importance of access to takeoff and landing slots for airline competition, and noted the government-ordered Harris review that recommended reforms to take away slot allocation powers from incumbent airlines.
“If you can’t get slots at Sydney airport, you just cannot enter the industry,” he said. “And yet, the benefit of having Bonza and Rex entering in a more substantive way would be enormous for the travelling public.”
Asked about Qantas and Virgin’s duopoly in Australian aviation, Sims said: “I’d be stunned if they haven’t taken advantage of their market power to raise prices.”
