Should Australia’s police airline industry get new mandate?

A new mandate to monitor the airline industry and assist new entrants in competing with established firms like Qantas and Virgin has been requested from the government of Albania by the director of the competition watchdog agency.

Gina Cass-Gottlieb, the head of the Australian Competition and Consumer Commission, stated that the regulatory body believes there is “a case” for a mandate to investigate competition, prices, and industry practices. This statement was made after an earlier direction was let to lapse in June.

This week, a Senate inquiry hearing took place, during which industry and airline leaders, such as Jayne Hrdlicka of Virgin Australia, voiced their support for a reformed watchdog monitoring scheme. This is in contrast to Qantas, which did not support a revived investigation. Cass-Gottlieb’s demand came after the hearing.

Following Virgin Australia’s entry into administration and the loss of budget carrier Tiger, as well as broader disruptions from pandemic border closures threatening other airlines’ operations, the Morrison government gave the ACCC the directive in June 2020 to monitor the domestic industry for anti-competitive behavior during a time of crisis. This was in response to the crisis that had been caused by the pandemic.

The Australian Competition & Consumer Commission (ACCC)’s domestic airline monitoring program came to an end in June, despite appeals for an extension from inside the aviation sector and consumer activists concerned about price gouging.

Since then, the number of concerns regarding anti-competitive conduct such as slot hoarding has only increased. As a result, Australian Competition & Consumer Commission (ACCC) has initiated legal action against Qantas for allegedly advertising and selling tickets for more than 8,000 flights that it had already cancelled in its system.

When asked if the ACCC would like the surveillance of the aviation industry to be repeated, Cass-Gottlieb stated in an interview with the Australia: “That original direction had a specific focus on the impact of Covid.”

“We do see a case for reinstatement of a direction that would look to the status of competition as well as survey prices, costs, and the manner in which operations are carried out,” the authors write.

Cass-Gottlieb stated that this should be done “both to meet customer service expectations but also in terms of enabling the success of entry and expansion of recent entrants, including Rex and Bonza” in order to make room for greater competition.

The Australian Competition & Consumer Commission (ACCC) stated in its final monitoring report in June that a further direction “would provide continued transparency and scrutiny of the industry at a time when new and expanding airlines are still trying to establish themselves.”

At the time, Cass-Gottlieb stated that in order for the regulator to compel airlines to submit particular information, it would need to have grounds to think that a violation of the law had happened. This is because the regulator maintains the same authorities for aviation as it does for the regulation of all other businesses.

In June, she stated that “Domestic aviation is most concentrated industries in entire Australia, barring natural monopolies including such as electricity grids and rail networks.” This is in comparison to the fact that natural monopolies include electricity grids and rail networks.

The Qantas as well as Virgin Australia airline groups have had less incentive to offer appealing air rates, build more direct routes, operate more dependable services, and invest in systems to provide high levels of customer care because there is no genuine prospect of losing passengers to other carriers.

“Rex’s expansion on to major intercity routes and Bonza’s launch have both been positive developments for competition. Despite this, their share of the market is still relatively small, and there are barriers to growth,”

Hearings held by a Senate committee probing into the decision made by the Albanese administration to deny Qatar Airways’ application for extra flights into major Australian airports, a decision that was advantageous to Qantas, have focused on industry practices as well as a lack of competition in the market.

Rod Sims, a former chair of the ACCC, testified on Wednesday before the committee that the legislation limiting access to Sydney airport was “extremely problematic” and “frankly ridiculous” since it benefited Qantas and Virgin.

During his testimony before the Senate select committee on bilateral air service agreements, Sims emphasized the significance of having access to takeoff and landing slots for the purpose of airline competition. He also brought up the government-ordered Harris review, which suggested changes to remove slot allocation powers from existing airlines.

“You just can’t get into the industry if you can’t get slots at Sydney airport,” he added. “It’s just not possible.” However, the traveling public would stand to gain an immense amount of advantage if Bonza and Rex were to enter the market in a more substantial manner.

When asked about the duopoly that exists in the Australian aviation industry between Qantas and Virgin, Sims responded, “I’d be stunned if they haven’t taken advantage of their market power to raise prices.”

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