ACCC says it’s crucial that rules change to prevent Qantas, Virgin duopoly

The Albanese government is facing growing calls to crack down on major airlines hoarding plane slots at Sydney Airport, with the competition watchdog warning a “duopoly” has emerged between Qantas and Virgin.

Australian Competition and Consumer Commission (ACCC) chair Gina Cass-Gottlieb says lacklustre competition among airlines is driving up airfares and delivering poorer service.

The industry is now at a “critical juncture”, the regulator said on Monday, amid bids from new entrants like Regional Express (REX) and Bonza to undercut Qantas and Virgin on big routes.

But Ms Cass-Gottlieb warned the federal government must first settle a long-running dispute over access to plane space at Sydney Airport, a pivotal centrepiece in the east coast aviation market.

Without reforms that level the playing field for smaller players, Australians will continue paying too much for travel and service standards will be worse than otherwise, Ms Cass-Gottlieb said.

“Access to peak-time slots at Sydney Airport is critical for new and expanding airlines seeking to build an intercity network,” she said on Monday.

“Without legislative reform to the airport’s demand management scheme there will not be any material improvement in domestic airline competition in Australia in the foreseeable future.”

Sydney Airport slots ‘untenable’

Former ACCC chair Rod Sims says changes are needed now.

Mr Sims underscored the urgency of allowing Bonza and Rex to take the fight to bigger airlines in an interview with The New Daily on Monday, calling it key in easing high airfare prices and improving sub-par service standards.

“It’s clearly time to deal with the slots at Sydney Airport,” he told TND.

“The fact that Rex and Bonza, who are potential competitors, cannot get slots is untenable.”

Mr Sims, a long-standing advocate of changes to slot allocation at the airport, argued Australia must ensure it doesn’t lose “this window of competition” because new airline entrants don’t come along every day.

In its report on Monday, the ACCC suggested changes that stop airlines hoarding slots at Sydney Airport, and an end to preferential treatment for incumbent players when spaces are allocated under legislation.

Those conclusions echoed a 2021 review into the issue by the Morrison government, which called for rules that preference slot allocations for existing airlines over newer entrants to be axed.

Minister waits for another review

But when asked on Monday whether the government supports such reforms, a spokesperson for Transport Minister Catherine King pointed instead to an ‘Aviation White Paper’ due for release in early 2024.

“The ACCC has already made a submission to the White Paper process, and we will continue to consider these issues,” a spokesperson for Ms King said on Monday.

“The Green Paper, which will reveal the initial directions of the final White Paper, will be released in coming months.”

The Aviation White Paper will be the second major policy review of demand management at Sydney Airport in the past three years, not including the ACCC’s work.

Airlines can exploit scheme

Public spats between airlines over airport slots have grown in recent years as Rex accuses Qantas of preventing it from competing on the “golden triangle” between Sydney, Melbourne and Brisbane.

Bonza recently outlined similar concerns, saying slot access had been an impediment to the low-cost airline launching services in and out of Sydney.

The ACCC took aim at access to take-off and landing slots at Sydney Airport during peak times, saying rules allowing players to “retain slots in perpetuity” were problematic.

It exacerbates capacity issues at the airport, the ACCC found, “limiting the opportunities for new or expanding airlines to acquire slots needed to launch new services and compete”.

“Airlines can exploit the scheme by acquiring and hoarding slots for strategic reasons, such as to prevent competitors’ access to slots, resulting in inefficient slot use and further diminishing opportunities for increased competition,” the ACCC said in its latest aviation report.

Rico Merkert, a professor at the University of Sydney, said much of the capacity at Sydney Airport is “concentrated” between Qantas and Virgin, with new players facing entry barriers.

“In order to be competitive, a new entrant would need slots both in the morning and evening peak hours to guarantee a same-day return flight,” Professor Merkert told TND.

“This is virtually impossible as … [Sydney Airport] is operating at capacity again at peak hours.”

RMIT associate professor Chrystal Zhang said inadequate access to slots at Sydney has led new airlines to prioritise routes that don’t compete with Qantas and Virgin, limiting the benefits.

“Optimising slot usage and management is really critical,” she told TND.

“It needs to be improved and enhanced.”

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