Australia’s consumer watchdog wants the federal government to establish an independent dispute resolution ombudsman to resolve issues between passengers and airlines, warning the lack of effective competition in the sector results in high airfares and poor customer service.
In its final monitoring report of Australia’s airline industry, the Australian Competition and Consumer Commission (ACCC) also said Sydney Airport’s demand management scheme – which controls how many take-off and landing slots airlines have access to – should be overhauled to give new and expanding airlines better access, as first outlined by the 2021 Harris review.
The ACCC’s final airline monitoring report delivered a scathing assessment of the level of competition between airlines. Credit: Brook Mitchell
ACCC chair Gina Cass-Gottlieb told this masthead more work was needed to inject greater competition into the local airline industry.
“We need more competition. We think we’re poised where that’s a possibility due to the entry and expansion of Regional Express (Rex) and the entry of Bonza, but they’re both at a low level. More competition would put pressure on price, service and reliability, but we need to remove some barriers to allow that,” she said.
The Morrison government directed the ACCC to monitor the level of competition between the country’s airlines as well as the cost of airfares and airline profit margins in June 2020 for a period of three years. This report is the last of 12 and found that although there are now four carriers servicing the industry, a Qantas-Virgin Australia duopoly continues to dominate the market.
Just under 95 per cent of passengers flew with Qantas or Virgin in April. The Qantas group – which owns Jetstar and QantasLink – accounts for more than 60 per cent of the domestic market, while Virgin holds over 30 per cent. Rex hovers at about 5 per cent and Bonza sits at 1 per cent.
“The duopoly market structure of the domestic airline industry has made it one of the most highly concentrated industries in Australia, other than natural monopolies. The lack of effective competition over the last decade has resulted in underwhelming outcomes for consumers in terms of airfares, reliability of services and customer service,” the report said.
The report shows the delay and cancellation rates have deteriorated since showing signs of improvement earlier this year and remain well below the long-term industry averages, according to data from the Bureau of Infrastructure, Transport and Research Economics (BITRE). Qantas has had a lower rate of cancellations and delays than Virgin for the past eight months.
The ACCC added in its report that cancellation and delay rates, problematic even before the disruption of the pandemic, were also a sign of growing congestion at our airports.
Cancellations and delays are not always the fault of airlines but are often a side effect of the complicated aviation supply chain, which makes it vulnerable to a range of factors, including bad weather and staff shortages.
Recent staffing issues at Airservices Australia – the government body responsible for overseeing landings, take-offs and in-air safety – have made the issue worse since the pandemic. Meanwhile, the complicated regulations at Sydney Airport, which is subject to a curfew and movement caps, remain a factor in exacerbating a delay or forcing a cancellation.
The ACCC’s final report has highlighted an ongoing dip in airfares, which continue to fall from their 15-year peak in December. While the lower cost of jet fuel has taken some heat off fares, some routes continue to be outliers. The price of the Coffs Harbour to Sydney route tripled to $348 this month, while several routes including Brisbane to Darwin and Launceston to Sydney have more than doubled.
The ACCC said it will continue to watch the behaviour of Virgin and Qantas in a bid to give Rex and Bonza a fighting chance to pick up more passengers, and will intervene if any anticompetitive behaviour occurs.
“Should Rex and Bonza not succeed and withdraw from the market, it will not just result in less competition in the near term but will likely deter new airlines from attempting to enter the domestic industry for many years,” the regulator said.
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