Australian Minister Wants to Split Qantas and Jetstar

1 tydzień temu

SYDNEY- Nationals Leader David Littleproud has distanced himself from a proposal to threaten Qantas (QF) and Jetstar (JQ) with break-up powers in response to anti-competitive behavior.

Shadow Transport Minister Bridget McKenzie initially suggested introducing aviation break-up powers to improve the Qantas and Virgin Australia (VA) duopoly’s conduct.

Qantas and Jetstar Split

McKenzie emphasized public expectations for safe, punctual flights, timely baggage handling, and affordable tickets. The Coalition has already adopted similar divestiture powers for the grocery sector, citing market distortion due to Coles and Woolworths’ dominance.

McKenzie argued that the mere threat of break-up powers could effectively regulate airline behavior without forcing a sell-off. However, Littleproud later stated on Sky News that it was premature to pursue such measures for airlines, contrasting it with the supermarket sector.

Littleproud clarified that the Coalition aims to ensure cheaper airfares through a careful examination of competition policy. He emphasized a calm and methodical approach, noting that they have not yet taken concrete steps toward implementing break-up powers for airlines.

The Coalition intends to have the Treasury consider the issue further. Meanwhile, Transport Minister Catherine King dismissed McKenzie’s proposal as a “thought bubble,” highlighting the lack of consensus within the opposition on this matter.

White Paper for Aviation Policy

The federal government recently released a white paper outlining its aviation policy direction, proposing an ombudsman authority to enforce improved airline customer service.

The government also initiated changes to slot allocation at Sydney Airport (SYD), addressing allegations of anti-competitive “slot hoarding” by Qantas and Virgin.

Senator Bridget McKenzie criticized the white paper for lacking specific measures to improve flight punctuality and address rising airfare costs. In response, a spokeswoman for Transport Minister Catherine King asserted that the Coalition had either not read or misunderstood the white paper, which contains significant sector reforms.

A Treasury review of airline competition revealed that increased competition reduces price growth. The addition of a second competitor on a route typically lowers airfares by 25%.

The review also found that Qantas responds differently to route entry by Jetstar versus other competitors, lowering prices when non-affiliated competitors enter but raising them when Jetstar does, suggesting greater price discrimination capabilities.

Senator McKenzie argued that the Treasury review identified competition as a problem. In the absence of a plan to enhance competition, she suggested Treasurer Jim Chalmers should consider implementing break-up powers for airlines.

McKenzie emphasized the need to address Qantas’ ownership structure, stating that the Coalition’s goal is to achieve lower prices for Australian travelers.

Dupoly in the Australian Market

Senator Bridget McKenzie highlighted the severe market concentration in Australia’s aviation sector, noting that 92% of the industry is controlled by two players. She argued that such concentration would face harsh criticism if it occurred in the supermarket sector.

McKenzie pointed out that when Qantas and Jetstar are the sole carriers on a route, Qantas increases its prices.

Shadow Finance Minister Jane Hume echoed public frustration with Qantas and Virgin’s dominance. Hume called for the government to include aviation in the Treasury’s competition review, addressing the aviation white paper’s perceived shortcomings.

The Coalition seeks to empower the Australian Competition and Consumer Commission (ACCC) to better understand and address industry collusion.

However, Assistant Minister Matt Thistlethwaite dismissed the divestiture proposal as a “crazy economic policy.” He questioned the practicality of such a move, asking who would purchase Jetstar if Qantas were forced to divest it.

Thistlethwaite emphasized that while everyone desires increased competition and lower fares, the Coalition has failed to address crucial questions regarding the implementation of their proposed policy.

Allan Fels, former chair of the Australian Competition and Consumer Commission (ACCC), advocates for the introduction of divestiture powers in Australia’s competition law. He cites the United States as an example where courts can break up companies that abuse market power.

What are your thoughts on the proposal to break up bigger carriers such as Qantas? Let us know in the comments.

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