Performance anxiety: How can our airlines do better?

Transport Minister Catherine King is in the midst of arguably her most difficult task: finding a way to deliver much-needed aviation policy changes without disproportionately disrupting any one stakeholder.

It’s a complicated tightrope to walk. On the one hand, COVID-19 exposed a multitude of structural issues within the aviation industry that require significant policy overhaul. On the other, airlines are a notoriously difficult industry to make money from.

Catherine King is tasked with delivering aviation policy reform.
Catherine King is tasked with delivering aviation policy reform.Credit: Alex Ellinghausen

King’s department will deliver a white paper on aviation reform in mid-2024 after it wades through about 300 public submissions on its preliminary document: the aviation green paper.

Some more contentious requests may result in sweeping changes to consumer protection, sustainability and Sydney Airport’s slot demand management system.

But the long-awaited aviation white paper has become somewhat of a private joke for some in the sector, who say they are fed up with consecutive governments using reviews as a way to dodge making actual changes.

So what could change?

Some of the suggested changes, such as modernising the 20-year-old legislation that governs Sydney Airport, have already been mooted in other independent reviews but ignored by successive governments.

Some of the parties, including Qantas, Virgin Australia and Sydney Airport, have submitted more than 100 pages littered with contradictory recommendations.

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Key industry players have also made confidential submissions and regularly meet King and other ministers in an effort to get the best outcome for their organisation.

This can make it difficult to gauge which direction the government will go.

Consumer protection

Aviation has been under intense consumer scrutiny since international borders reopened after the COVID-19 pandemic in 2021 and the industry struggled to get back into shape.

Over the past three years, travellers have suffered high flight cancellations, poor on-time performance and substandard customer service, putting the spotlight on airlines, airports and government regulators.

Customers often complain that local airlines are difficult to deal with in the event of a dispute. The government and opposition have repeatedly reprimanded airlines, so it’s a sure bet reform is coming.

The Australian Competition and Consumer Commission, and other advocates like Choice, want an independent ombudsman scheme to replace the existing Airline Customer Advocate.

The ACA is funded by the airlines and is often criticised as a glorified messaging box which in 2022 resolved just 43 per cent of complaints lodged.

The competition regulator says it’s received an average of 360 contacts every month about airline disputes since 2018.

Qantas and Virgin are at odds over the issue. Qantas has urged any ombudsman scheme to be cost-conscious and be broadened to include the rest of the aviation sector, while Virgin wants an emboldened, external version of the ACA, whose decisions are binding.

But both Qantas and Virgin – which collectively fly more than 90 per cent of domestic passengers – are warning the government against establishing an EU-style compensation scheme.

They argue that airline-specific schemes risk increased airfares and will not actually improve on-time performance or the rate of cancellations.

Sustainability

Aviation is responsible for about 2.5 per cent of the world’s emissions, which is a bigger contribution than Australia itself.

The global aviation industry knows it won’t meet its decarbonisation targets without replacing carbon-emitting jet fuel with sustainable aviation fuel (SAF).

Airports and airlines are desperate for immediate policy action to develop a local sustainable aviation fuel industry, both to benefit Australia and to avoid the expense of importing fuels from countries like the US.

Airports and airlines are desperate for policy action to develop a local sustainable aviation fuel industry.
Airports and airlines are desperate for policy action to develop a local sustainable aviation fuel industry.Credit:

Flying will become more expensive if Australia doesn’t get its sustainable fuel policy right. Sustainable fuels are currently about five times the cost of jet fuel and make up less than 0.1 per cent of the available supply.

There are, of course, other ways to decarbonise aviation and reduce waste, but the bulk of emissions is caused by long-haul flights. Axing short flights is unlikely to materially abate CO2. It’s a pinch point for Australia, which doesn’t have effective alternate transport across long distances.

Many bodies, including the Airports Association of Australia, Qantas, Virgin and Air New Zealand, say the government should capitalise on the time-sensitive opportunity to develop local production – or risk falling further behind already-established players in the US and EU.

The industry has committed capital and combined forces with manufacturers Airbus and Boeing to try and coax the federal government into action ahead of the white paper’s release.

Air New Zealand has called for Australia to work with New Zealand in developing an aligned policy framework and become joint producers for the Asia-Pacific region.

Qantas has asked the government to follow other regions including the UK, Denmark and Norway in mandating a certain percentage of flights be fuelled sustainably by 2030.

Slots and competition

Whether it’s airlines calling for more monitoring of monopoly airports or airports attributing most issues in the sector to the airline duopoly, competition is one of the most important and delicate issues in aviation.

In 2020, former Productivity Commission chair Peter Harris delivered a report into the slot management at Sydney Airport which called for an overhaul to make it easier for new entrants, both domestic and international, to fly in and out of the hub.

Successive governments failed to implement his recommendations to the chagrin of some airlines and the country’s airports who allege the domestic market is not competitive enough.

The country’s airports accuse Qantas and Virgin of hoarding slots at Sydney Airport to keep new entrants out of peak take-off and landing times on high-frequency routes.

Almost 10 per cent of flights from Melbourne to Sydney were cancelled in November. Nine per cent were cancelled from Sydney to Melbourne. The route is the fifth-most popular in the world, yet its passengers routinely experience high cancellation rates.

Qantas – which controls 60 per cent of the market with its budget arm Jetstar – has been adamant it only cancels flights on high-frequency routes as a way to minimise disruption elsewhere. This is because routes with lower frequencies disproportionately inconvenience those travelling on them in the event of a cancellation.

The competition watchdog recently called out Sydney Airport’s slot manager, Airport Coordination Australia, as having a conflict of interest because Qantas and Virgin are its major owners.

The watchdog says the airline industry is one of the most concentrated in the country. It’s also called for regulatory reform to the Aeronautical Pricing Principles to dilute the “significant market power” airports have in negotiations with carriers.

There are four domestic airlines in Australia but just two carry all but 10 per cent of the country’s flying public. This is in part because we live in such a big country with a small population and also because it’s historically difficult to generate profits from aviation.

Less than 65 per cent of flights arrived or took off on time in November, lower than the long-term average of 81 per cent. Almost 4 per cent of flights were cancelled compared with the long-term average of just over 2 per cent.

Many reasons cause flight cancellations, which is not always the fault of airlines, but the competition monitor has called out a lack of competition between local airlines and airports as worsening consumer rights and the overall performance of the industry.

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Source: Thanks smh.com