Labor opens tender process to crack down on anti-competitive behaviour at Sydney Airport after Rex’s collapse

Labor has vowed to crack down on anti-competitive behaviour and make it easier for new airlines to get access to Australia’s busiest airport, as it makes its first move following the collapse of Rex.

Rex entered voluntary administration last week and is seeking a buyer to continue its regional services. Picture: NewsWire / Jeremy Piper

Labor has vowed to crack down on anti-competitive behaviour and make it easier for new airlines to gain access to Australia’s busiest airport as it makes its first move to reform the aviation industry in the wake of the collapse of Rex.

Transport Minister Catherine King will on Monday open a competitive tender process to appoint a new manager of Sydney Airport’s lucrative timeslots, after being accused of a “failure of public policy” by allowing a company majority owned by Qantas and Virgin Australia to allocate the windows in and out of the country’s biggest gateway.

Under the tender process, prospective slot managers will have to demonstrate how they will manage and mitigate conflicts of interest while delivering on the government’s aviation reforms announced earlier this year.

Those reforms, which are still to be introduced to parliament, ­include changing the allocation process to free up more slots and changing the definition of a new entrant to make it easier for new airlines to obtain time windows. The successful slot manager will have to publish its policy outlining how potential or perceived conflicts of interest will be dealt with.

“Our reforms to the slot system at Sydney Airport are an important part of improving competition and significantly increase transparency,” Ms King, who has left all options on the table to save Rex, said. “We are getting on with the job of delivering the reforms that were announced in February.”

While Ms King has insisted slots had nothing to do with Rex entering voluntary administration last week, former Australian Competition & Consumer Commission chair Rod Sims warned the country’s third-largest airline had been disadvantaged by a system that required the approval of Qantas and Virgin to get access to Sydney Airport.

Rex will continue its regional flights but has abandoned the market between capital cities.

“The government has baked in a duopoly through its own policy,” Professor Sims told The Australian last week. “Slot reform is the necessary condition for competition. You can’t have competition without reform of the slot system. So let’s fix the slot system and then let’s see if we can get a third player (on the capital city routes).”

The government announced its response to the 2021 Harris Review of Sydney Airport’s demand management framework nearly six months ago, acknowledging slot reform was critical to improving competition. The Coalition has attacked Labor for failing to put its legislation to parliament since then, pointing out the government had two years to overhaul the slots system.

Opposition transport spokeswoman Bridget McKenzie has also lashed the government for running a “protection racket” for Qantas, after Anthony Albanese and Ms King blamed Rex’s demise on its decision to start capital-city routes.

In evidence to the Senate in September last year, then Rex deputy chair John Sharp claimed Qantas had been happy to tolerate the airline’s regional services but decided to “destroy” that business when Rex entered the capital city market in 2020, after being ­handed about $60m in federal government Covid support.

“One of the ways you can curb the market power is by doing things like addressing the slot system at Sydney Airport,” Mr Sharp said at the time.

“We all understand that Qantas is hoarding slots at Sydney Airport. They abuse the 80-20 rule (in which airlines can keep their slots if they operate at least 80 per cent of their flights). If you wanted to create more competition and, say, let Bonza have some slots or let Rex have the slots it would like to have, or let some international airline operators into Sydney to create more economic activity, you could take away 10 per cent of Qantas’s slots tomorrow and you wouldn’t affect Qantas’s ­operations.”

Qantas and Virgin Australia have consistently denied they played a part in the failure of Rex and Bonza, insisting both airlines had access to slots at Sydney ­Airport.

Former deputy prime minister and transport minister Michael McCormack conceded to The Australian that Rex “did take ­advantage” of the Covid funding package and said it wasn’t helped by its entrance into the capital city market.

The government’s slots legislation, which Labor says it will introduce this year, would require airlines to provide regular information on how they use slots, such as reasons for cancellations or major delays, with the information to be regularly published.

Independent audits of slot usage will also be undertaken, with the first already under way and results expected to be released once completed.

A new compliance regime with penalties to address anti-competitive behaviour would be introduced, with the government to watch airlines more closely and take legal action where necessary.

“The recommendations for change were handed to the previous government in February 2021,” Ms King said. “On coming to office, it was clear that the previous government had shown little interest in issuing a serious response to the findings.

“In contrast, the Albanese government started the white paper process and undertook consultation, including targeted consultation, on responding to the Harris Review.

“We are serious about making long term reforms to aviation in Australia that are much needed after a decade of neglect.”