Fares zoom above costs as Qantas cries poor to politicians and staff; cries rich to sharemarket

by Michael Sainsbury | Dec 11, 2022 | Business, Latest Posts

Qantas is pulling back capacity to keep its airfare prices high as cagey chief Alan Joyce profiteers from the airline’s dominant market position and political clout. Michael Sainsbury reports on the insipid ACCC report into airline competition. 

The combination of Qantas’s mounting profits, record high airfares, threats by Alan Joyce to cut “marginal” routes and the struggle of offshore airlines to get more landing slots in Australia all point to one thing: the failure of competition in the Australia airline sector.

Yet the Australian Competition and Consumer Commission (ACCC) and the Albanese government seem determined to do not very much about it. On December 6, the competition watchdog issued its latest quarterly report on domestic competition in the Australian airline market. 

It runs to over 100 pages, a quarterly exercise that is surely costing taxpayers hundreds of thousands of dollars a pop, and details the fact that average revenue per passenger, an indication of average airfares across all fare types, was 27% higher in October 2022 than it was in October 2019 before the Pandemic. It also confirms that airlines have wound back capacity, the key move behind rising prices and corporate profits at the expense of customers.

An index of the discounted economy fares on the top 70 domestic routes in November 2022 was more than double what it was in April 2022, an 11-year low. In September this year, the same index of the cheapest available fares reached a 15-year high.

And that’s after Qantas snaffled more than $2bn in JobKeeper and assorted special airline subsidies and continued to screw down costs via its belligerent, even illegal, workplace practices.

“Airfares have risen due to strong demand for travel and constrained supply as airlines have scaled back their schedules in response to high jet fuel costs and operational challenges,” ACCC Commissioner Anna Brakey said.

“Deliberately withholding capacity”, say pilots

Qantas pilots confirmed that the company was only offering many international pilots minimum hours for the latest 56 hour roster that was published yesterday- that is 145 hours for the roster instead of the usual 165 hours or more.

Pilots who spoke with MWM on conduction of anonymity said that they were “sitting around twiddling their thumbs” for much of the time. “We can see what they are doing, they are deliberately withholding capacity so aircraft are full and they can charge higher prices,” one pilot said.

It’s not only Qantas but Virgin and Rex as well, the ACCC noted, and industry insiders confirmed. But with its 65% or so market share, and more premium business and first class seats, Qantas has the most to gain. “No one has broken ranks yet” the pilot noted.

The jet fuel furphy

The ACCC has also swallowed the ‘fuel increases’ line that has been used constantly by Joyce – as well as other airlines – for the past two years to justify large fare hikes. Jet fuel prices have risen with the increase in all oil prices since the Russian invasion of Ukraine.

Yet the price of jet fuel in Australia was $US109.5 per barrel on March 2, according to the JET-AI-FUEL.com. On December 8, it was $US108 per barrel, but major airlines like Qantas never pay retail, getting discounts of up to 20-25%, industry figures say. Qantas would pay less for its fuel than its Australian rivals. Jet fuel is about 20% of a full service airline’s costs.

How any of this justifies the price hikes of 25%, often as high as 100% as we have seen in Australia, is unclear.

Newly installed ACCC chair, former Gilbert & Tobin lawyer Gina Cass-Gottlieb – who has been in the job for eight months – is flubbing her first stern test by Qantas which holds at least 65% of the market as well as gulping down much of the airline’s and industry’s  propaganda. To her credit, she has put Qantas’s takeover of shuttle operator Alliance on hold, for now at least.

The ACCC has pulled out a decidedly limp lettuce from its arsenal of corporate enforcement tools, promising only to monitor airlines “closely to ensure they return capacity to the market in a timely manner to start easing pressure on airfares. We would be concerned if airlines withheld capacity to keep airfares high”. One would have thought that the ACCC was monitoring them closely already, indeed we have four bumper reports just this year to prove it. 

But days into the next quarter, there is no sign of airfares falling even on the most competitive routes. A Sydney-Melbourne flight next Friday December 16 returning two weeks later on Jetstar starts at $546 before baggage and seat selection. On Qantas, fares for the same flight start at $568, on Virgin it’s $515.

An early evening flight comes in about $630. Flying from Brisbane to Perth, on the same day, starts at $1,066 on an early Jetstar flight to $1,684 for an afternoon Qantas flight. The short Sydney-Dubbo hop is $430 and Melbourne-Mildura as much as $684.

Qantas profits soar, but little room for better pay for staff as shareholders re-Joyce

The Minister for Qantas

Australia’s Minister for Infrastructure, Transport, Regional Development and Local Government and Minister Catherine King has been very circumspect about the airline sector since stepping into the admittedly very busy role, apart from occasionally adding her “disappointment” to strikes and customers troubles.

King has confirmed that the government is “working on” an aviation white paper. She had this to say on Twitter prior to the election: “If the PM hadn’t denied JobKeeper to so many aviation workers or stood by as thousands were sacked, we wouldn’t be seeing this airport chaos.That’s why there are staff shortages. Government failures drove too many skilled workers from the industry.”

But since then, not so much.

Assistant Transport Minister Carol Brown has spoken up on social media about Qantas’ attack on its staff pay and conditions.

Good old Chairman’s Lounge

It is well worth noting that King and Brown are both members of Qantas exclusive, invitation only Chairman’s Lounge, as are all politicians. Such are the perks of office. While King gained entry in April ahead of the election, Brown was only let in in August. We are not suggesting, of course, that this would influence their decision making in any way.

She (Jacquie Lambie) was subsequently banned from Qantas flights for six months

Still, it’s clear what happens to irksome politicians who mess with Qantas. Last year, outspoken Senator Jacquie Lambie got into a verbal stoush in the Chairman’s Lounge, accusations flew, she apologised but was still subsequently banned from Qantas flights for six months.

It’s understandable that Qantas had the big business cheerleading Coalition government so much on side it handed over $2 billion in Covid subsidies from the public purse, even as Joyce made swingeing cuts to its workforce and outsourced key functions including baggage handling under the cover of the pandemic.

The ongoing disaster of this strategy was writ large when a video of Qantas baggage handlers thrashing customers luggage went viral on social media. As the saying goes, you pay peanuts, you get monkeys.


But it’s more curious that the new Labor government has been similarly hands off. There is much it could do to help boost competition in the sector. As this publication has previously noted, Prime Minister Anthony Albanese was left gasping in late 2011, when Alan Joyce grounded the Qantas fleet when he was Transport Minister.

At a press conference following the lockout, Albanese was described in media reports as “visibly annoyed” as he described three meetings with Joyce, then union boss now senator Tony Sheldon and himself, where “at no stage” did Mr Joyce say Qantas would initiate a lockout and grounding.

“In the current climate of high airfares, competition is more important than ever in helping to constrain prices, and giving consumers more choice,” ACCC Commissioner Anna Brakey said.

Then there’s … Jetstar!

Twelve years after reaching 58 routes in 2010, Jetstar is plying the same number of routes as the first nominally first low cost carrier in the Australian market. Since then, there has been no other discount airline launched in Australia – a testament to Qantas strategy of creating its own low cost carrier, backed by its blue chip balance sheet, to keep rivals out of the market. Qantas has also forced regional airline Rex from some routes using its financial muscle.

This means that Australian consumers have been under-served by low cost air-travel compared to many other countries, at least until now with start-up Bonza itching to take to the skies with an discount business model designed around offering point to point flights where they have not been offered before.

Enter Bonza, oh wait …

Bonza’s plans to launch  before this holiday season have been stymied by the achingly slow bureaucracy of the Civil Aviation Safety Authority. The company’s chief executive and founder Tim Jordan has a long history with LCCs in Southeast and Central Asia. He’s diplomatic about the CASA delay despite the fact that it has punched a hole his business plan.

Bonza has 150 staff including pilots, cabin crew and ground staff cooling their heels. The company has two 737Max aircraft at its Sunshine Coast Airport headquarters with a third due to arrive this week.

“We are the first new high capacity AOC ( Airline ) for 15 years, and it’s a process we are working through respectfully. It will be when the regulator is happy we will be happy,” he told Michael West Media. The safety regulator’s wheels turn notoriously slowly and many industry see it as being something of a heaving bureaucracy. This is surely another area where the government could give CASA a push. 

Jordan is confident that the airline’s model of running point to point services on routes that overwhelmingly (93%) do not already have services will bare-out the confidence of his investors, Miami based Private Equity firm 777 Partners. The group has a large aircraft leasing business and has already backed Canadian LCC Flair – the reason Jordan approached them with his Australian LCC plan.

The airline will launch with 17 routes but can already add more with its third aircraft using a low frequency, low cost model. Jordan is flagging fares of just $50 for flights of an hour or less and $75 for larger flights – plus baggage seat selection and any other extras. While some regional airports are unable to take 737 aircraft he estimated that that are 40-50 around the country that will eventually be able to handle the aircraft.

Alan Joyce’s “natural market share”

“It’s not just about this Christmas it’s a very long term plan for our investors,” he says. Still, while he won’t say so, many in the industry believe that Qantas will use its age-old tactics of wielding its balance sheet to compete with new airlines to stop them eating into what Joyce likes to describe as its ‘natural” market share.

Indeed, when she was in opposition King was all too happy to call Qantas out.

Recent reports that Qantas and Rex will fight it out on regional routes is the latest symptom of the Morrison Government’s failure to develop a comprehensive aviation plan as we emerge from COVID 19,” she said in Feb 2021

“Rather than chart a way forward for Australian aviation, the Morrison Government’s inept market interventions have laid the groundwork for a fight between Qantas and Rex which has the potential to see even more loss of service for regional Australians.”

In March this year she promised a “white paper” for aviation though it’s notable it did not specify competition as a ket plank.

Anybody seen my White Paper?

“An Albanese Labor Government will deliver a new aviation white paper to set the scene for the next generation of growth and development across the aviation sector, while also establishing effective mechanisms for consultation and management of issues like aircraft noise and airport development, “ she said.

The Federal government – Labor under Paul Keating – privatised Qantas with no requirement for its aircraft to fly to certain parts of the country. This is now how Joyce uses the threat of withdrawing from routes as part of his non-stop lobbying efforts in Canberra. Qantas was privatised with no price controls – especially on monopoly routes. And no service guarantees.

Australia has no industry regulator to ensure that Qantas does not use its market power to push newer, smaller airlines out of business – leaving that to the ACCC which, as we have seen, is all too clearly timid when it comes to Qantas; and it has its work spread too thinly.

If the airline sector is so essential – and it clearly is in a vast country like Australia that is so far from other nations – healthy competition is vital. The federal government is happy to hand over billions of taxpayer dollars to Qantas to “save it” during the pandemic. Its surging return to record profits has made something of a lie of its pandemic era pleading.

Far better to place some restrictions on Qantas regarding landing rights, put some protections in place for Bonza – and perhaps Rex,  consider forcing Qantas to divest Jetstar and give the industry the regulator which it has long needed.

Customers also need a no-nonsense legislated regime of money-back guarantees for cancellations, delays and other issues as they have in the EU, UK and New Zealand.

Catherine King, it’s your move.

Qantas board gets priorities straight – its own pay – as Alan Joyce edges towards $8.7m package

Michael Sainsbury is a former China correspondent who has lived and worked across North, Southeast and South Asia for 11 years. Now based in regional Australia, he has more than 25 years’ experience writing about business, politics and human rights in Australia and the Indo-Pacific. He has worked for News Corp, Fairfax, Nikkei and a range of independent media outlets and has won multiple awards in Australia and Asia for his reporting. He is a fierce believer in the importance of independent media.

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