Qantas, energy companies accused of price gouging in a landmark report by Allan Fels

Qantas not only has engaged in price gouging but has been protected by government policy, a scathing report by Professor Allan Fels says.

Former ACCC chair Professor Allan Fels has delivered a scathing assessment of Qantas and the energy sector.

Qantas has been singled out for special attention in a landmark report on price gouging and unfair pricing practices by former Australian Competition and Consumer Commission chair Allan Fels.

Commissioned by the ACTU, Professor Fels’ report followed a series of public hearings and more than 750 submissions across a range of industries, including aviation, electricity, groceries and banking.

He said what was common in industries where unfair pricing practices occurred was “barriers to entry and a lack of competitors” – sometimes due to government restrictions or a lack of consumer awareness.

In the “highly concentrated” electricity sector, three companies dominated – AGL, Energy Australia and Origin.

Prof Fels said prices had risen 22.3 per cent in the period from March 2021 to September 2023, and it was clear the system was not fit for purpose.

“The distress (to consumers) caused by high energy bills extends beyond financial hardship, affecting the social and emotional wellbeing of both adults and children in low income households,” he said.

Prof Fels said Qantas had long dominated Australia’s aviation sector and was “price gouging”. 

As an example, Prof Fels highlighted how Qantas kept a tight rein on capacity in the face of huge post-Covid demand for travel, driving fares up, which was to the detriment of all.

“Qantas’ ability to reduce supply while increasing prices and suffering no material loss of market share may have affected CPI in December 2022, and therefore may have impacted the Reserve Bank’s inflation expectations and rate increases,” wrote Prof Fels.

“A quarter of the inflation that month was mainly due to Qantas aggressively raising airfares although Virgin may have also contributed.”

The report zeroed in on the protection for Qantas provided by governments in the form of generous pandemic assistance and key policy decisions.

Prof Fels said it was “quite clear” the federal government was acting in the interests of Qantas when it made the decision to deny Qatar Airways more flights in mid-2023.

“In essence, Qatar offered a solution to the extremely high prices that were being charged for international travel,” he said.

“However, this proposal was blocked by the Australian government.”

Former Qantas chief Alan Joyce was fond of telling customers that if they wanted cheap fares they could fly Jetstar.

He recommended the current review of aviation policy being conducted by the Department of Infrastructure and Transport remove restrictions on international aviation that were harmful to consumers’ interests.

The difficulties facing new entrants in the domestic aviation market also needed to be addressed, particularly in relation to access to airport slots, Prof Fels said.

Qantas and Virgin Australia have both been accused of retaining more slots than needed at Sydney Airport for the purpose of keeping other airlines out of Australia’s biggest gateway.

Prof Fels said the department should “review and remove anti-competitive restrictions on allocation of slots at airports”.

“Regarding any remaining restrictions on competition following this review there should be a separate review led by the commonwealth department of treasury as part of the National Competition Review.”

In a statement posted on its website, Qantas rejected allegations of price gouging, saying that airfares had dropped significantly since December 2022 and insisting Australia’s aviation market was highly competitive.

Loyalty schemes also came in for criticism in the report. Prof Fels said they were designed to “lock in customers and ward off the impact of competition”.

He said the terms and conditions were often unclear, and did not provide sufficient transparency to the detriment of consumers.

“For example, frequent flyer programs suggest people can cash in their points for a free flight only to find out that the cost of purchasing an airfare without using points is like the cost using points when the add-ons, taxes and other charges are included,” the report said.

ACTU secretary Sally McManus thanked Prof Fels for the report, saying it identified the need to rein in the power of big business to price gouge customers.

“The gaming of the system in the wholesale energy market is particularly concerning.” Ms McManus said.

“Generation makes up 30 per cent of our household bills and action here could have an immediate effect on our cost of living.”

Originally published as Qantas, energy companies accused of price gouging in a landmark report by Allan Fels