The good, bad and ugly of the aviation white paper

If the definition of a successful reform is making some stakeholders ecstatic and others furious, then the government’s aviation white paper misses the mark.

The airlines have escaped a big stick of being forced to provide financial compensation to customers for delays or cancellations. Avoiding this was first, second and third prize for Qantas and Virgin.

Aviation customers will get a consumer advocate.Credit: James Davies

But it was No.1 on the wishlist of just about every regular and occasional flyer, mainly because it would be an incredibly powerful incentive for airlines to lift their operational performance.

It would surely reduce the incidence of those airport scenes of passengers lying on the floor using cushions fashioned from luggage and eating airline-provided pizza.

Realistically, the industry knew the government would never take a swing that big.

That said, having skirted around introducing a European-style passenger compensation system, the government has made a good impersonation of a body that understands that other than on safety, Australian aviation has been regulation-lite for decades.

For the government, introducing an ombudsman is really reform’s low-hanging fruit.

It is rare for a sector that is so heavily concentrated (Qantas Group has 65-plus per cent of the domestic market share) to be allowed to operate so freely.

Last year, the Labor government blotted its copybook by clumsily supporting Qantas and not allowing Qatar to increase flights into Australia, and in doing so, it missed the opportunity to increase international competition and shave the price of airfares to Europe.

But it was the final nudge it needed to play much-needed regulation catch-up.

The idea of introducing an aviation ombudsman might be second prize for travellers, but it is a good one.

The second-rate complaints body that was supposed to fill this function was at best ineffective, and at worst impotent, which is hardly surprising given it was funded by the airlines.

The airlines have been very aware that this lack of a proper consumer advocate party couldn’t go on forever, so you won’t hear them complaining about it.

For the government, introducing an ombudsman is really reform’s low-hanging fruit.

Customers can also look forward to what the government is calling an Aviation Customer Rights Charter, which sets the fair and appropriate treatment of customers by airlines and airports.

Sounds interesting enough, but its usefulness depends on what it determines to be appropriate treatment and what kind of punishment airlines will suffer for inappropriate treatment.

One really handy feature of the aviation ombudsman is its ability to do a deeper dive into why flights are cancelled or delayed.

The airlines have long trotted out the argument that much of this disruption is due to factors outside their control, such as problems with air traffic control or the weather. But airlines also change schedules for commercial reasons, such as not enough passengers.

Improving transparency on this issue should provide incentive for the airlines to improve their cancellation and on-time performance.

The biggest potential risk for our major airlines is an overhaul of the slots system, which allocates landing rights, both in terms of number and the times aircraft are able to land.

There is a long-held argument that the current system entrenches the big two incumbents and makes it difficult for new airline entrants to compete, particularly at capital city airports.

Change is undoubtedly long overdue.

However, suggestions that the slot system should take much of the blame for a slew of airline bankruptcies over the past three decades is probably a bridge too far.

Even with a kinder or more equitable slots regime, breaking into the Australian aviation market is near impossible without very deep pockets of capital, and the reward for a large investment can be volatile.

The long-term returns for Virgin and Qantas – even as near duopolists – are testament to that.

The aviation white paper is a good start, but it is difficult for any government to legislate more competition.

If the proposed ombudsman has sufficiently sharp teeth, it should improve airline behaviour as has been the result in other sectors, such as energy and communications.

It shouldn’t be worrying the Virgin or Qantas C suite. It won’t have any impact on the sale of Virgin or its listing plans. And if Qantas’ share price is any guide (it’s up almost 2 per cent), it won’t hurt its shareholders either.

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