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The former head of the Productivity Commission has told a House inquiry that Australia can “easily justify” having more than two major airlines.
Peter Harris, who chaired the organisation from 2012 to 2018, said it was the “height of absurdity” to think that the domestic market can only sustain two airlines as calls continue to mount for an overhaul of the controversial takeoff slot system.
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Speaking to the House committee inquiry into promoting economic dynamism, competition and business formation this week, Harris said Australia is large enough to support more carriers and that the 80/20 rule at Sydney Airport – which allows an airline to keep a take-off slot indefinitely as long as they use it 80 per cent of the time – should be reset.
“I’m pretty sure that the Sydney–Melbourne corridor is the second or maybe the third largest utilised aviation corridor in the world. You’ve got such an intense use, yet to say it can only support two airlines seems to me to be the height of absurdity,” he said, as reported by The Australian Financial Review.
“I would think we could easily justify more than two airlines. And the important question then, as we know, for competition is the ability to enter reasonably, at a reasonably low set cost, and this comes back to the question of slots.”
Harris also called for an audit of the reasons airlines cancel flights, amid recent high cancellation rates, which saw 2,300 flights between Sydney and Melbourne scrubbed in the first six months of 2023.
His intervention comes after months of controversy over the slot system, including a scathing report by the ACCC in June that said the 80/20 rule is open to abuse. The consumer watchdog also said that the current effective Qantas-Virgin duopoly has resulted in higher airfares and worse service.
“Domestic aviation is one of the most concentrated industries in Australia, barring only natural monopolies such as electricity grids and rail networks,” said ACCC chair Gina Cass-Gottlieb last month.
“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.
“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.”
While an aviation white paper is due next year, House committee chairman Dan Mulino indicated that there are urgent reforms which could be undertaken beforehand.
“We’ve received some pretty strong evidence on this, and we’re only halfway through the aviation sector, and we’re yet to hear from Rex and Qantas and the airports,” said Mulino.
“We’re kind of just starting our process, but we’re looking for things that could be done fairly quickly.”
