COVID reversal as small airlines expand, ACCC reports

The competition watchdog’s first report on the airline industry has found a surprising reversal of fortunes for the country’s carriers.

The ACCC is monitoring Australia’s airline industry for any anti-competitive behaviour at the federal government’s request. Picture: Brendon Thorne/Bloomberg

The competition watchdog’s first report on Australia’s airline industry has found the COVID crisis has created opportunities for some carriers and devastated others.

The federal government asked the Australian Competition and Consumer Commission in June to keep tabs on the industry, largely to ensure Virgin Australia was given the best chance of recovery as it emerged from administration.

ACCC chairman Rod Sims said a lot had changed since then.

“Domestic airline travel was expected to be on its way to returning to more regular operations by now but infection spikes in some states and tighter border restrictions have delayed the recovery,” said Mr Sims.

The sorts of activities which the ACCC would be watching included dumping capacity on routes to harm a rival’s ability to compete; predatory pricing to force competitors out of the market, and the hoarding of airport slots.

“We will act if we identify behaviour that damages competition, either arising from the conduct by airlines directly or through their arrangements with others,” Mr Sims said.

“The ACCC will be reporting to government regularly and this will assist with informed policy development, particularly if we observe signs that competition in the sector is not effective.”

Despite a complaint made by Regional Express airlines with regard to Qantas’s scheduling of flights on routes flown by the smaller carrier, the report noted that Rex and Alliance were both undergoing expansion, while Qantas and Virgin Australia were shrinking.

“Market changes have created opportunities for some airlines to expand into the domestic network as the availability of infrastructure, aircraft, pilots and fuel has improved,” said the report.

“At the same time, major airlines Qantas and Virgin are downsizing and restructuring their fleets and workforces to reduce operating costs.”

Rex has indicated it will buy between five and ten Boeing 737s to operate on the “Golden Triangle” routes of Sydney-Melbourne-Brisbane from March 2021.

And Alliance has 14 Embraer 190 jets on order, to help meet demand from resource sector clients for fly-in, fly-out operations.

Qantas on the other hand has flagged a 20 per cent reduction in its workforce, and temporarily suspended all international flying while Virgin Australia is expected to shed a third of its staff as it emerges from administration.

The report noted that Qantas’s 19.9 per cent stake in Alliance continued to be monitored by the ACCC for any signs of anti-competitive outcomes.

Mr Sims said it was essential competition was safeguarded throughout the pandemic so the domestic airline industry could meet the needs of customers and the economy more broadly.

“Australia’s domestic airline industry over the next few years may look quite different to the one that went into 2020,” he said.

“Air travel is vital for the economy in a country as large and geographically dispersed as Australia.”

A second report was expected in December.