Qantas, Virgin Australia unite to take aim at airport ‘super profits’

Qantas and Virgin Australia have teamed up to argue their case for reduced airport charges to the federal government.

Paul Scurrah and Alan Joyce at the National Press Club in Canberra on Wednesday. Picture: Getty Images

A stoush over who is more profitable, airports or airlines, moved to the national capital on Wednesday as Qantas and Virgin Australia teamed up to argue their case to the federal government.

In a rare show of unity, airline chief executives Alan Joyce and Paul Scurrah shared the stage at the National Press Club to ­demand monopoly airports be brought into line.

The appearance was timed to coincide with Josh Frydenberg’s consideration of the Productivity Commission’s final report on the economic regulation of airports, which is believed to recommend the current light-handed monitoring regime be maintained.

As Mr Joyce pointed out that Sydney, Melbourne, Brisbane and Perth airports all were achieving “super profits”, a Morgan Stanley note upgraded its outlook for the Qantas share price to $7.

Even with considerable volatility in the oil price, Qantas was set to fly through any headwinds thanks to the strength of its powerhouse frequent-flyer program, the note said.

“Loyalty growth has accelerated and is increasingly separate from the vagaries of the airline ­industry,” equity analyst Niraj Shah said. “It has better pricing power and cost control without the volatility that comes with the capital intensity of an airline.

“Further, we note Virgin Australia has ­announced its intention to ­acquire the remaining 35 per cent of its Velocity business.”

But Mr Joyce said Qantas’s profit for the 2019 financial year of $1.3bn was not in the same ­ballpark as the figures achieved by airports.

Although the four major airports made an average of $550m each in the past year, less than half that of Qantas, Mr Joyce said his airline was a much bigger company and had a profit margin of just 8 per cent or 9 per cent.

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“The airports’ profit margins are around 50 per cent,” he said. “If Qantas had the same sort of margin, we’d be making a $9bn profit. Imagine the outcry.”

Mr Joyce argued that high airport charges affected airline operations, saying he would not fly Jetstar into Canberra ­because aeronautical fees made up about a quarter of the average fare.

“We can’t put Jetstar in ­because it economically doesn’t work for us. It’s just not economical, and that is why airfares into Canberra are higher than most.”

Mr Scurrah said all airlines were “swimming against the tide of costs being imposed by privately owned, monopoly airports who were exempt from real competition, and the regulation and fair play that comes with it”.

“I want to make our airline stronger, which is why I am here with Alan to shine a light on a ­system that allows practices that are unchecked, unregulated and ­unseen by travellers far and wide,” Mr Scurrah said.

However, the Australian Airports Association warned that Virgin Australia was being hoodwinked by Qantas, which would be the main beneficiary of the changes being sought.

AAA chief executive Caroline Wilkie said the negotiate-arbitrate model was an opportunity for Qantas to bypass the court system so it could go straight to arbitration for its “own commercial gain”.

“They can’t and won’t guarantee that if savings were achieved they would be passed on to passengers,” Ms Wilkie said.

Shares in Qantas and Virgin Australia closed up for the day at $6.28 and 17c respectively.