CANBERRA, AAP – The viability of the airline industry as a whole matters right now, rather than Rex and Qantas sparring on regional routes, the competition tsar says.
“The industry is in a state of flux,” Australian Competition and Consumer Commission chair Rod Sims said on Thursday at a Senate hearing into the future of Australia’s aviation sector post-COVID-19.
“It’s a rapidly evolving picture.”
Capacity, pricing and whether airlines are profitable and sustainable are key to whether the industry is set up for success or failure, he said.
The competition watchdog has been granted extra powers by Treasurer Josh Frydenberg to monitor the sector, during the pandemic and as it attempts to land a recovery.
“Obviously with Rex entering into the major routes it’s going to be interesting to see how that goes,” Mr Sims said, welcoming an initial fall in prices.
“With regional routes, it’s a picture we’re watching overall.”
But he said predatory pricing to knock the other player out and cross-subsidisation are also on the radar.
“I’m always sceptical about someone saying they’re providing a community service, so don’t take money off me over here,” Mr Sims said.
Rex has indicated it will cross-subsidise routes as it takes on Qantas in the so-called golden triangle of Sydney-Melbourne-Brisbane, while the larger airline is adding dozens of regional routes.
In testimony to the inquiry on Wednesday, Rex insisted Commonwealth funding was not being used to support its expansion.
Mr Sims says the issue of predatory behaviour is whether they are making cash profits on those routes.
“Once we start getting back to normal you might have a different definition of what constitutes predatory,” he said.
“It will very much depend on overall health and whether those regional centres are getting appropriately serviced.
“Our sense at the moment is that they are making a contribution to cost.”
COVID lessons for the airline industry included “better co-ordination” to deal with immediate border closures and differences between jurisdictions.
“How the government supports industry is going to be unfolding over time,” Mr Sims said.
Whether it’s regional or international, it will be evolving and support will be temporary, he says.
“I think international aviation coming back is a fair way off.”
Mr Sims also said he was surprised Qantas would take 20 per cent of Alliance and think it could take full ownership.
“It does indicate a mindset we have to keep an eye on,” he said.
Qantas acquired a 19.9 per cent interest in Alliance in 2019, becoming Alliance’s single biggest shareholder and sparking an ACCC investigation as Alliance was a close competitor on regional routes.
The Qantas decision to buy the stake in Alliance without first seeking ACCC clearance means this is an enforcement investigation rather than a standard merger review.