Shots fired! AFTA comments hit airlines where it hurts

This week AFTA launched a broadside against elements of three ACCC authorisation applications lodged by Qantas and some of its airline partners - putting travel agent commission, NDC adoption and refunds squarely into the public eye.

IT DIDN’T happen overnight, but it did happen. After three years of pandemic pain – exacerbated by airline commission cuts, blocked BSP refunds and the forced adoption of NDC booking channels – the Australian Federation of Travel Agents (AFTA) has spoken out publicly to highlight the death by a thousand cuts being imposed on the travel distribution system over the same period.

As we reported in Travel Daily late last year, for several months now the Australian Competition and Consumer Commission (ACCC) has been considering three key applications from Qantas and its partner airlines, seeking exemption from competition rules so that they can coordinate flights, schedules, pricing and more. The most significant pact is probably the proposed extension of the long-running Qantas-Emirates alliance, which has been in place for the last 10 years and which expires in March.

It’s been fascinating to see billboards pop up recently around some of our major airports highlighting the close cooperation of QF and EK, in which the airlines wax lyrical about the benefits achieved through their longstanding pact. There’s no doubt that this massive deal changed the aviation landscape when it was first implemented, but it’s also interesting to note that since then things have changed a lot – including the fact that Qantas no longer even flies to Dubai and has returned to its traditional Singapore stopover on the one-hop Kangaroo route.

Indeed Qantas and Emirates probably thought the extension of the deal, under an even more relaxed Restated Master Coordination Agreement lodged in November last year, was a lay-down misère, given that not a single submission on the issue had been published by the ACCC prior to the middle of last week when public consultation closed.

However right at the last moment AFTA made its submissions, and I would have loved to see the reaction of the airline powers-that-be when Monday’s issue of Travel Daily came out this week highlighting the lodgements. While AFTA CEO Dean Long has made pains to note that the Federation has “neither supported nor objected to the re-authorisations”, the ACCC is likely to take notice of the issues raised, which are matters with which the travel industry is well-acquainted.

The ACCC, quite rightly, is only concerned about the impact of any airline agreements on consumers themselves, so the carriers are making great pains to highlight the end-user benefits of their proposed agreement extensions. However AFTA’s submissions note such measures as restricting the availability of certain fare types and schedules to particular channels, which it says have the impact of limiting consumer choice. Moreover, the reduction of front-end BSP commission remuneration for travel agents, and the resulting suggestions from airlines that its distributors should charge service fees, is also resulting in higher costs for consumers, AFTA highlighted – along with the $17.50 segment fee which applies to GDS bookings not made via the Qantas Channel.

The Federation also urges that airlines should not be able to share any information about agency commissions or other commercial deals under their proposed alliance agreements, because there is no clear consumer benefit from such collaboration, and most tellingly urges the ACCC to ensure that airlines should not be able to turn off the refund process to travel agents on behalf of their customers, as happened during the pandemic.

While the airlines tout the undeniable benefits of their deals, including more convenient schedules, better reciprocity for frequent flyers and a more efficient market, AFTA has also noted that “any changes approved by the ACCC must result in capacity increases, and not price increases”.

Qantas and Emirates are seeking a renewal of their agreement for at least five years, while a less ambitious application has been lodged on behalf of Qantas and China Eastern Airlines, wanting to give them a year to cooperate as the Australia-China market rebuilds. AFTA has deftly pointed out that the series of recent announcements about the reopening of China’s borders has been followed by a flurry of capacity increases from other airlines, which seem to be able to boost their operations without requiring immunity from competition law.

The third application relates to Qantas being allowed to cooperate with its low-cost stable of Jetstar carriers across the region as part of its Pan-Asia strategy – for the next decade. Jetstar Japan and Jetstar Asia are included in the proposed pact, along with Qantas’ home-grown 100%-owned LCC offshoot, and while AFTA is happy to back the Asia-Pacific regional arrangements, again it’s noted that the proposed wide-ranging cooperation agreement does give the Qantas Group unprecedented market power locally, particularly on the Australian domestic sectors of a multi-carrier international Jetstar itinerary.

AFTA’s submissions aren’t quite an outright declaration of war, but the push-back has been welcomed as long overdue by many sectors of the industry and it will be intriguing to see how it plays out. None of the carriers involved are commenting on the submissions at this stage, while AFTA is also keeping its powder dry in terms of additional commentary while the formal ACCC review process is undertaken.

The next phase is for the applicant airlines to respond to issues raised in the public consultation process, with a draft ACCC determination flagged for February or March – followed by a second public consultation period and then final determinations scheduled for April or May 2023.

There’s no doubt that just like travel agents, airlines suffered greatly through the pandemic. AFTA’s submissions note, however, repeated public announcements by the airlines in recent months about their stunning turnaround in profitability, which appear somewhat at odds with some of the claims made in the alliance reauthorisation requests about the significant uncertainty facing aviation, and the resulting necessity of allowing wide-ranging collaboration.

As AFTA CEO Dean Long ingenously stated in an email to the Federation’s 1,750-strong membership this week, the submissions simply “identify several areas that we believe need further clarification to justify the exemption to the law, which we as ATAS businesses must adhere to”.

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