FOR all of the well-publicised efforts that Qantas has invested into rehabilitating its shattered reputation, recent comments from supposed ‘change agent’ CEO Vanessa Hudson suggest the Flying Kangaroo may be up to its old tricks again.
Speaking at the introduction of Qantas’ new ultra long-haul flights between Perth and Paris, Hudson claimed the downfall of Bonza was testament to Australia’s inability to accommodate more than three major domestic airlines.
“We are an island nation; our economy relies on domestic aviation and…we want our airlines, and Virgin [Australia] and Rex, to be sustainable,” Hudson said.
“To be sustainable [airlines] have got to be making a certain amount of revenue to invest – we don’t want a weak aviation market,” Hudson said.
The comments were reminiscent of former Qantas CEO Alan Joyce’s playbook.
Joyce would bristle at suggestions Australian travellers were victims of a virtual duopoly in domestic aviation, instead pointing to razor thin margins that plague most airlines and Australia’s low population and geography as cast iron proof there was simply no more room for another major competitor.
Mind you, these sentiments were often expressed during times of boom profits for Qantas.
While Hudson’s comments were inclusive of VA and Rex, it is worth noting that the viability of the latter is currently being questioned as we speak.
In the face of staff shortages and rising fuel costs, Rex has declined to provide a full-year profit guidance for 2024.
The carrier has been forced to scrap multiple routes indefinitely, with many speculating that competing with the ticket slashing tactics from Qantas and VA on the Golden Triangle has proven tougher than its board initially anticipated.
But if you listen to Rex, the primary source of its current troubles are down to anti-competitive practices from Qantas, which it claims has pillaged its pilots and undercut ticket prices to chase them off certain routes.
If the worst-case scenario came to pass and Rex were to fall over, would we be likely to see Hudson claiming that Australia isn’t big enough for more than two major players?
Probably.
The fact is, in my humble opinion, the viability of domestic carriers is not so much about the number of players at the table but the rules of the game each player is expected to abide by.
Few people want to see a carrier go bust, even those who harbour animus toward the likes of Qantas, because ultimately that is going to be a poor result for consumers, many of whom are already feeling the pinch of the rising cost of living.
To that point, the Australian Airports Association’s (AAA) Head of Policy and Advocacy, Natalie Heazlewood, told TB that Hudson’s inferences fly in the face of the basic economic need of travellers.
“The importance of competition for reducing airfare prices for the travelling Australian public cannot be overstated,” Heazlewood said.
“We need more competition in our aviation sector as this helps to reduce prices on the routes where multiply airlines are flying.
“The recent cessation of Bonza was a major blow for competition, the Melbourne-to-Gold Coast route is Australia’s sixth busiest route, and when Bonza was operating, airfares were almost 55% cheaper than they are currently,” she added.
Heazlewood also noted that since the entry of the new Rex Perth-Melbourne route, airfares had fallen by almost 40%, which she described as “a massive win for passengers”.
Another critic of the idea that there will never be another Bonza is RoyceComm Director and former senior Australian Aviation and Tourism Executive, Simon Westaway.
Speaking with TB this week, Westaway said while the barriers to a new sustainable market entrant remain high, there were a plethora of good incentives for a new player to roll the dice and set up shop in Australia.
“Australia’s domestic aviation market has, and remains, one of the world’s most profitable and dynamic markets, and as such, it will continue to entice future new market aspirants based on Australian aviation’s historic profitability levels and relative scale,” he explained.
“There’s no doubt a well-funded and strategic future player could re-enter, as we’ve previously seen on many occasions.
“Or more likely a major international carrier closely aligning to a current domestic airline, in line with competition regulations, to bring further diversity and more competition,” he added.
Westaway said that the biggest carrot for future players will be the country’s deep east coast city pairs revolving around Sydney, Melbourne and South-East Queensland triangle.
A Senate Select Committee examining potential anti-competitive practices in Australia’s aviation industry last year found there was a need to put measures in place to block the misuse of market power in the domestic market.
The same Committee also identified a requirement for a formal inquiry into potential anticompetitive behaviour, as well as an urgent call for reform to airport slot management rules – both of which, if actioned effectively, would go a long way to levelling the playing field for any new entrant in the future.
There are many moving parts to the downfall of Bonza, and an aspect of the cautionary tale is perhaps not to become too obsessed with the numbers game.
Much ink has been spilled examining the carrier’s sudden collapse, with many pundits concurring with Hudson, that the saga essentially proves Australia simply can’t handle more than three major airlines.
However, it’s fairly clear that Bonza’s chances of success would have been markedly higher had its parent company not fallen into financial difficulties.
It’s also fair to say that if Bonza had been granted access to the country’s largest hub in Sydney Airport, it would have been given a fairer crack at delivering a rosier financial picture to its investors.
The comments from Hudson probably say more about Qantas than it does about the market, with the woman at the helm considered by many to be Alan Joyce’s successor long before she ever took control of the company last year.
With so much work being done in the public eye to mend the brand bruising left by an abrasive former CEO, one has to question how much actual cultural change has taken place under Hudson.
There is an opportunity for Qantas to plot a course for a much greater pro-competition mantra, but despite all of the hauling over the coals and public condemnation in recent years, I suspect Hudson will not be the person to steer the business toward a genuinely customer-centric approach.
