The air route between Sydney and Melbourne has long been one of the busiest in the world, and while ticketing systems will show more than 150 flights a day, picking one that doesn’t get cancelled can be like playing Russian roulette.
Statistics show that just under one in 10 flights on the route will be cancelled and there’s a bitter dispute within aviation circles with some claiming major airlines are selling tickets to Sydney services they never intend to fly.
A growing chorus of critics are pleading for changes to the strict legislation that governs Sydney airport, which they say provides bizarre incentives for airlines to schedule then cancel certain services.
What are slots and how do they affect Sydney airport?
Sydney airport has a 11pm-6am curfew, but there are several other rules limiting its operations.
Airlines are issued a specific time and day – known as a slot – for an aircraft to land or take off at airports around the world. Slots are traditionally issued twice a year in “seasons”, and incumbent airlines can retain their slots each season.
However, if an airline fails to operate at least 80% of a particular slot in a season – meaning if they don’t run a specific flight more than 20% of its schedule – they risk losing it.
Additionally, Sydney is one of many airports in the world which is slot constrained.
Legislation from 1997 aimed at minimising noise pollution in the densely populated catchment around the airport dictates a cap of 20 movements every 15 minute period, which effectively means no more than 80 combined take-offs and landings per hour in Sydney.
What is slot hoarding?
The so-called “use it or lose it” or “80/20 rule” was designed to prevent airlines from bidding for all unallocated slots and deliberately not flying them as a tactic to block competitors looking to introduce a rival service.
This behaviour has come to be known as “slot hoarding”.
As demand to fly in and out of Sydney has increased in recent decades, critics say the 80/20 rule has proved too generous for an airport with slots as scarce as Sydney’s.
There are accusations that airlines, specifically Qantas, Jetstar and Virgin, carefully engage in slot hoarding at Sydney airport but stay within the rules to retain their slots.
To do this, carriers allegedly schedule more flights on a particular route than they have demand or capacity to run, and ultimately cancel the surplus services.
By rotating which service they cancel and consolidating passengers on to their remaining flights, airlines can spread the cancellations across their schedule so that no specific slots exceed a 20% cancellation rate.
What does the data show?
Critics point to the consistently high cancellation rates on Sydney routes – at 8.7% in July this year between the city and Melbourne and Canberra, and stubbornly high for Adelaide and Brisbane too – as proof the rules are being abused.
Government data also shows larger airlines have higher cancellation rates on these routes compared with smaller operators – Virgin cancelled 10.9% of flights from Sydney to Melbourne in July, while Rex’s rate was just 4.6%.
What does the industry say?
Smaller airlines such as Rex, which has only begun flying large jets between Sydney and Melbourne and Brisbane in recent years, as well as new budget carrier Bonza, have been pleading for the Sydney slot allocation system to be overhauled.
They say accessing peak time slots is a particular issue. Slots at peak times can be important for an airline trying to establish a presence at an airport, because if it can only access slots on either side of Sydney airport’s curfew it poses difficulties in running a return leg and coordinating aircraft and crew across a national network.
The smaller airlines also argue it’s unfair if they are barred from introducing flights at the most in-demand times of the day to fly, when it’s easier to sell out planes and run profitable flights.
It’s not just smaller airlines furious at the rules. A broad chorus of aviation and competition leaders, including Sydney airport, the Australian Airports Association, and former and current commissioners of the Australian Competition and Consumer Commission, have repeatedly called for urgent action. A 2021 government-ordered review into the system also recommended reforms.
Critics say the current rules are preventing competition and leaving Australians paying more for flights out of Sydney airport.
On Monday, Sydney airport’s outgoing chief, Geoff Culbert, addressed stagnant domestic passenger growth: “We continue to see evidence of unused slots going to waste, with a persistent mismatch between slots held by domestic airlines and the schedule that is flown.”
John Sharp, deputy chairman of Rex and transport minister when the legislation was formed in 1997, has previously told Guardian Australia: “It’s as plain as the nose on your face that Qantas is hoarding slots by cancelling sufficient flights to remain within the 80/20 rule.”
Qantas Group – which together with budget carrier Jetstar operates 66% of domestic aviation – and Virgin Australia vehemently denies it hoards slots at Sydney.
Qantas points to the fact it lost 1% of its slots in the most recent season as proof the system works, and attributes high cancellation rates out of Sydney as chiefly related to bad weather and air traffic controller shortages.
“The claim that Qantas is hoarding slots at Sydney airport is simply wrong,”, the chief executive of its domestic arm, Andrew David, said in July.
Virgin Australia has said it does not believe changing the 80/20 rule is necessary. Susan Schneider, the airline’s chief legal and risk officer, told a parliamentary standing committee on economics in June that “we have a slot portfolio that is necessary for us to be competitive, to have scale and to compete against the Qantas Group”.
Weather and air traffic controller shortages do cause cancellations, but Sydney Airport believes the airlines exaggerate their impact to mask deliberate cancellations. In April 46% of Sydney-Melbourne cancellations occurred on days with no weather or air traffic controller incidents.
Can it be fixed?
The 2021 government review made several recommendations, including greater scrutiny of cancellation data and more communication with airlines to determine whether cancellations are anti-competitive.
Neither the former Coalition government nor current Labor government has adopted the recommendations.
The Albanese government is instead pursuing an aviation white paper, which has a broad scope for industry-wide reforms. While the white paper is due next year, the earlier draft, known as the green paper, is already running behind schedule.
The transport minister, Catherine King, has resisted calls to urgently reform the Sydney slot system ahead of the white paper process.
This has left critics concerned that slot hoarding will be able to continue for years to come.
