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While Compass aircraft may have been putting on a happy face in recent times, the airline's management were not so cheerful with allegations that Ansett and Australian were colluding on fares and adversely affecting Compass ticket sales via their widespread ownership of major travel agencies. (Julian Green)
Compass Calls for TPC Investigation
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Compass Calls on Tpc to Investigate Practices of Competing Airlines
In December last year Compass chief executive officer Sam Coats called for the Trade Practices Commission (TPC) to investigate domestic airline pricing practices and the influence of airline controlled travel agencies.
Mr Coats alleged Ansett and Australian Airlines were in collusion over fares. This came after Australian’s decision to cut fares, by up to 60% in some cases, on a number of routes. Not surprisingly Ansett responded by matching Australian’s fares shortly afterwards.
Fares collusion is difficult to prove. In an environment as competitive as the domestic airline industry, if one airline cuts fares its competitors must either match the fares or face the likely possibility of losing their customers to its competitor. Any rational airline will decide to reduce its fares and accept the associated yield dilution to retain their customer base. Provided costs are covered in the long run and at least partially covered in the short term and the airline has adequate capital reserves, they will stay in business. If they do not match their competitor’s fares, however, they will face the near certainty of going broke. Thus, the airline usually has little choice but to match their competitor’s fares.
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