Add Category
The federal government's rejection of extra Qatar Airways flights to protect Qantas was "a really bad decision" with a "weak" explanation that disadvantages customers, two former bosses of Australian's competition watchdog say.
Key points:
- The federal government blocked Qatar's application for an additional 21 flights to "protect the national interest"
- Former ACCC bosses Allan Fels and Rod Sims say the decision is uncompetitive and will keep airfares higher
- The CEOs of Flight Centre and ANZ say the government's intervention is puzzling and defies logic
In July, it was revealed the federal government rejected a bid by Qatar Airways to add 21 extra flights per week to Sydney, Melbourne and Brisbane, in addition to the 28 weekly flights it currently offers.
The government hadn't provided a straightforward explanation for its decision to reject the application until Monday this week, when the Australian Financial Review published comments from Assistant Treasurer Stephen Jones, who was quoted saying the decision was in the national interest and would help keep Qantas profitable.
Qantas chief executive Alan Joyce defended the government's decision before a Senate committee on Monday afternoon, arguing that allowing extra flights by Qatar would distort the market.
But his argument was rejected by Virgin Australia boss Jayne Hrdlicka on Tuesday, whose airline codeshares with Qatar.
Ms Hrdlicka said the claim was "nonsense," and allowing more flights would help to meet the high demand for seats in Australia and reduce airfares.
And now Allan Fels, the inaugural chair of the Australian Competition and Consumer Commission (ACCC), says the decision by the federal government to reject extra Qatar flights is protecting Qantas from competition.
"It's a really bad decision by any standards, particularly when the government is talking about doing a competition review," he told News Breakfast on Wednesday.
"This is going to put up prices, or keep them up a lot. They're 50 per cent higher now than before COVID. They would come down a lot if Qatar entered.
"We don't really know [how much prices would come down by], but it would greatly increase the number of seats available and that brings prices down, but it would somewhat reduce Qantas' profits."
Rod Sims, who served as the ACCC chair from 2011 to 2022, has also weighed into the controversy, saying the decision is difficult to fathom.
"I think it does hurt competition," Mr Sims told RN Breakfast.
"What we see now particularly in Australia is very high airfares internationally and not enough capacity.
"If there was a time to allow new entrants in, this is it."
The Albanese government is now facing a renewed push for information about why the extra flights were denied after lobbying from Qantas.
Nationals senator Bridget McKenzie has given notice that she will move for the release of documents provided to the transport minister about Qatar's application, or advice that helped the minister make the decision next week.
It comes as a new report from the e61 Institute has raised concerns about the exercise of market power in Australia by dominant firms in concentrated markets.
The report, The State of Competition in Australia, warns Australia's economy has much higher levels of market concentration than the United States, and there's been a "broad increase in concentration" over time.
It says the airline industry is one of the most concentrated in Australia, and suggests the power dynamics between airlines and their customers is "imbalanced".
'Customers have been put second'
On Thursday, Mr Fels said there was "no secret reason" behind the government's decision to block Qatar Airways.
"Customers have been put second, so has tourism, business, freight, many other interests, also other airlines," he said.
"There's no secret reason for it, it's just looking after Qantas."
He rejected the assistant treasurer's reasoning it was to protect Qantas' viability and profitability.
"There's a lack of transparency. The explanations hinted at profit are quite weak, and don't make a lot of sense," Mr Fels said.
"Qantas made $2.5 billion [pre-tax] last year, its own profit forecasts into the future are very positive, with or without Qatar."
Mr Sims said the government needs to be transparent with voters about why it chose to reject Qatar's proposal.
"We haven't really had a good explanation in relation to the whole Qatar issue, and that's unfortunate," he said.
"I mean, when you are taking actions which have the effect, because there's no doubt they do, of decreasing competition and maintaining higher airfares, you need really clear explanations.
"I don't think we've seen that yet," Mr Sims said.
He urged the government to take a broader look at how it considers flight decisions and put customers first.
Mr Fels believes the decision warrants an investigation by "an independent body, maybe the ACCC".
Flight Centre, ANZ bosses question intervention
Graham Turner, the chief executive of Flight Centre, said the vetoing of Qatar's application would contribute to keeping airfares higher.
"The lack of capacity, particularly internationally, is pretty obvious at the moment. So blocking an airline like Qatar from extra capacity certainly doesn't help from our point of view," he told News Breakfast.
"Every extra flight into Australia will help lower these fares."
Mr Turner said he did not believe the assistant treasurer's comments about protecting the airline's viability, and it would instead harm Virgin Australia.
"I don't think anyone swallows that story," he said.
"You know, fair enough, domestic carriers, particularly who fly internationally, it's quite a competitive field where it was pre COVID, and I think the government has some role in trying to make sure airlines survive.
"But in this case, they're particularly damaging to the second airline in Australia ... because Virgin Australia don't have big international routes, they do mainly domestic, and the codeshare with Qatar is quite important to them, they get a lot of the flow-on traffic from international visitors and residents going out of Australia.
"I don't think that that notion flies at all. It's just something that he's obviously made up on the spot."
On Tuesday, Mr Turner told The World Today he was under the impression that someone above Transport Minster Catherine King made a "captain's call" to reject the application, "presumably the prime minister".
Speaking in Brisbane on Tuesday, ANZ chief executive Shayne Elliott also said he was "quite disturbed" by the government moving to block the flights to protect Qantas' profits and struggled to understand the level of support given to the airline.
Airline industry one of the most concentrated in Australia
According to the new e61 Institute report, released on Wednesday, more concentrated industries often have higher rates of consumer contraventions.
It says there have been a large number of infringement notices and enforceable undertakings issued by the ACCC over the last 30 years in the airline industry, "which is famously dominated by a small number of companies," relative to the number of firms in the industry.
By contrast, it says the accommodation industry, which is less concentrated and has a higher number of businesses, has had far fewer infringement notices issued.
It says repeat offences in concentrated industries are a key driver of the result.
However, it says more research is required to establish causality, because the large number of infringement notices issued in concentrated industries may reflect the increased regulatory scrutiny of firms in more concentrated industries.
The report warns highly concentrated industries often witness dominant firms becoming entrenched for longer, with higher barriers to entry for new firms.
It says that can hamper the emergence of young firms "which play a crucial role in exerting pressure on incumbent firms to innovate, and provide alternative options for workers seeking new jobs".
The e61 Institute is a non-partisan economic research institute.
This week, it announced the appointment of Michael Brennan as chief executive. Mr Brennan was recently chair of the Productivity Commission.