Cheap airfares and foreign airlines on ‘Northern Australia’ agenda

AIR travellers in Northern Australia could soon be paying cheaper fares on foreign planes under a plan to lift restrictions on overseas airlines.

AIR travellers in Northern Australia could soon be flying for much lower fares on foreign planes under a plan to lift restrictions on overseas airlines.

Federal Trade and Investment Minister Andrew Robb. Picture: Brendan Radke.

The move would allow carriers such as China southern or Singapore Airlines to fly tourists into airports such as Darwin or Cairns, load domestic passengers bound for the other city and make the return journey as a domestic flight before flying back to their home country.

Such large capacity would allow them to dramatically discount the domestic sectors.

CABINET SPLIT

Federal Cabinet’s Expenditure Review Committee (ERC) is deeply divided on the issue that is part of the government’s White Paper on Developing Northern Australia due out later this year.

City based free traders and economic rationalists such as Trade and Tourism Minister Andrew Robb and Treasurer Joe Hockey favour the policy allowing foreign airlines access to domestic routes.

The push is strongly opposed by others including National Party leader, Queensland MP and Deputy Prime Minister Warren Truss.

Both Qantas and Virgin Australia are also vehemently against lifting the so-called “cabotage restrictions” on foreign carriers seeking access to domestic air routes.

They say it would be the thin edge of the wedge and would give foreign airlines an unfair advantage for nothing in return.

For the defence ... Australian Deputy Prime Minister, Warren Truss doesn’t want foreign airlines flying domestic routes. Source: Getty

Cabotage means the carriage of passengers or goods between domestic ports by aircraft or vessels registered in a foreign country.

BENEFITS IN DOUBT

A government source confirmed the ERC discussion and told News Corp Australia that no one had convincingly argued the case for lifting restrictions on foreign airlines.

“The key questions are whether or not international carriers would see these routes as viable and how they would bring prices down,” the source said.

“The discussions are ongoing.”

Virtually no country in the world allows foreign airlines access to domestic routes and it is understood that no international airline has pushed for the change.

They could do the same between other cities or towns north of the Tropic of Capricorn such as Rockhampton, Mackay, Townsville, Port Hedland and Broome.

The recent Harper Review of competition policy recommended that air cabotage restrictions should be removed for all air cargo as well as passenger services to specific geographic areas based on apermit system.

A government green paper on Northern Australia also raised the issue in the context of possibly cheaper travel for remote communities.

INDUSTRY ‘FRAGILE’

Qantas said allowing foreign carriers to operate as de facto domestic airlines would have far reaching, unprecedented and damaging consequences for Australian aviation.

“It would change the economics of already commercially marginal routes in some parts of Northern Australia, which a number of regional carriers have been serving for decades,” it said in a statement.

“This would be the thin edge of a very large wedge, with overseas carriers willing to render point-to-point domestic routes unprofitable in order to increase their traffic in-and-out of Australia.”

Virgin Australia said that allowing foreign airlines access would fail to recognise to the essential role domestic airlines played in supporting Australian industry.

It also warned that the outcome would be network rationalisation whereby aircraft were redeployed onto higher-yielding routes at the expense of marginally-profitable or lossmaking regional routes.

Originally published as Cheap airfares and foreign airlines on ‘Northern Australia’ agenda