Over the last two decades, more than 90% of domestic passengers flew with either Qantas Group or Virgin Australia, and by April this year, the two airline groups managed to grow that share even more to 94%, sounding an alarm bell for the Australian Competition and Consumer Commission (ACCC) this week.
In its final Airline Competition in Australia report, the competition watchdog found Australia’s domestic aviation industry to be one of the most concentrated industries in the country, “barring only natural monopolies such as electricity grids and rail networks”, resulting in a lack of incentive to lower ticket prices or perform strongly on the customer service front.
“Without a real threat of losing passengers to other airlines, the Qantas and Virgin Australia airline groups have had less incentive to offer attractive airfares, develop more direct routes, operate more reliable services, and invest in systems to provide high levels of customer service,” ACCC Chair Gina Cass-Gottlieb said.
“Rex’s expansion onto major intercity routes and Bonza’s launch have been positive developments for competition, but their share of the market is small and there are barriers to growth,” she added.
To combat the dominance of the two carriers, which the ACCC said has come at the expense of the customer experience for travellers, the body recommended some big reforms to the sector to help even the ledger.
One of these recommendations included “a clear” need to introduce a new system for resolving disputes between airlines and consumers, arguing for the Airline Customer Advocate to be scrapped in favour of a truly independent external dispute resolution ombuds scheme which has the ability to make binding decisions.
The ACCC also advocated for the introduction of specific consumer compensation entitlements for delayed or cancelled flights, albeit with greater consultation needed before any policies were to be introduced.
The report also examined the barriers to entry for emerging players in the market, notably the obtaining of slots at Australia’s biggest airport in Sydney, suggesting an overhaul of the way they are allocated is needed so that bigger players are not able to hoard capacity and keep challenger airlines out in the cold.
One of those not able to get a look-in at Sydney Airport is Bonza, which echoed calls made by the ACCC for government reforms to be made about how airline slots are allocated at Sydney Airport.
“We could service up to about 20 destinations from Sydney and nearly half of those destinations currently do not have service in and out of the NSW capital – we believe that’s wrong, that’s wrong for tourism, that’s wrong for communities, and that’s certainly wrong for low fares,” Bonza CEO Tim Jordan told travelBulletin.
“We would just like this vital national infrastructure asset being better utilised, it’s as simple as that.
“When you have a scarce resource, it’s everybody’s imperative to maximise the use of that resource and that is not happening today.
“What we see is a current structure which allows incumbents and the status quo to continue – now that’s not good for a national infrastructure assets,” Jordan concluded.