Rex Airlines, Bonza and Australia’s airports body are calling on the federal government to immediately make it easier for airlines to introduce flights at Sydney airport and challenge Qantas and Virgin, warning that higher air fares and poorer service will persist if nothing changes.
The Australian Competition and Consumer Commission this week savaged policy shortcomings that are shutting out meaningful competition and have allowed for a duopoly to develop in Australia’s aviation market.
The warning was issued in the ACCC’s domestic aviation monitoring report on Monday, amid concerns of stubbornly high air fares that have not fallen with the recent decline in the cost of jet fuel.
The ACCC chair, Gina Cass-Gottlieb, noted the allocation of slots specifically at Sydney airport as a barrier to competition, with the number of take-offs and landings capped by federal legislation.
Cass-Gottlieb said “access to peak time slots at Sydney airport is critical for new and expanding airlines seeking to build an intercity network”.
Critics claim the current system benefits existing operators, as they can schedule more flights than they intend to run and selectively cancel them to still meet the “use it or lose it” rule of running at least 80% of a service to retain its slot and prevent competitors from introducing a rival service – dubbed “slot hoarding”.
The chief executive of new budget carrier Bonza, Tim Jordan, said his airline was desperate to introduce flights in Sydney, but it has not been able to get any peak time slots that would make expansion viable.
“It just seems wrong that we are unable to bring low-cost services to the Sydney basin, where almost a quarter of Australians choose to call home,” he said.
“We believe we could initially service 20 destinations to and from Sydney, and 90% of those routes don’t currently have a low-cost service and 50% aren’t serviced at all.”
Jordan said Sydney-Melbourne was not among Bonza’s initial plans.
Jordan stressed how important it was to get access to peak time slots to establish an airline’s presence at an airport and base an aircraft in a city.
“Unfortunately access to peak slots is just unobtainable for us at this moment. It’s sad and disappointing that vital national infrastructure is being underutilised and clearly that’s not good for consumers and it’s not good for competitive growth.”
Jordan said reforming the slot allocation laws deserved urgent attention before the delivery of the government’s much anticipated aviation white paper next year.
“Clearly it’s an urgent issue that needs to be addressed. Surely the question would be why wait?” Jordan said.
The deputy chair of Rex, John Sharp, agreed the slot allocation issue at Sydney airport needed urgent action from the government before the white paper process concluded. The airline has recently moved to compete on routes between capital cities.
“It does require immediate attention because it’s holding back competition in the airline market space, which is resulting in air fares being higher than they ought to be and services not as good as they should be,” Sharp said.
The ACCC’s final report noted cancellations were increasing across the country, but that performance on routes in and out of Sydney “continues to be especially poor” – something critics of the system, including Sharp, point to as evidence of slot hoarding.
after newsletter promotion
“It’s as plain as the nose on your face that Qantas is hoarding slots by cancelling sufficient flights to remain within the 80:20 rule,” Sharp said.
“We certainly have struggled to get slots at Sydney airport in order to enable us to compete on the major routes and as a consequence we don’t get the best slots, we have to use the crumbs that are left on the table.”
The ACCC report marks the end of a three-year Morrison government-commissioned undertaking that gave the watchdog abilities to compel airlines to provide information and gave it extra resources to probe the sector. The Albanese government will let the monitoring lapse this month.
Jordan and Sharp expressed concern the monitoring program was ending and backed calls for an ongoing, dedicated examination of the industry – an idea also pushed by the former ACCC chair Rod Sims and the Australian Airports Association CEO, James Goodwin.
On Monday, Goodwin said “it’s clear from the ACCC report that consumers are paying too much and reliability is also poor due to cancellations, all while profits remain high”.
Goodwin backed calls to reform the Sydney airport slot allocation immediately, noting the recommendations from a 2021 government review.
“There’s a review sitting with government. It’s clear it’s in everybody’s interest to adopt those recommendations,” Goodwin said.
The transport minister, Catherine King, has resisted calls to act before the white paper’s release. A spokesperson for King said she remains committed “to a system of demand management at Sydney Airport that balances the interests of communities under flight paths with the need to maintain reliable and affordable aviation connections to Sydney”.
A Sydney airport spokesperson said “the problem is that the current rules don’t work”.
“A rule that says it’s OK for airlines to cancel up to 20% of flights makes no sense and incentivises airlines to over-file for slots, leads to more cancellations, and clearly isn’t in the best interests of the travelling public,” the spokesperson said.
A Qantas spokesperson said the airline retains 99% of its slots under the use it or lose it rules at Sydney airport.
The ACCC report found Qantas Group – including budget carrier Jetstar – and Virgin Australia have carried 90% of domestic passengers over the past two decades.