MORNINGS, ABC CANBERRA
TUESDAY, 30 JANUARY 2024
SUBJECTS: New Treasury research on value of competition in the airline industry.
ADAM SHIRLEY, HOST: The skies well, clear as a bell. A good day for take-off and landing, but you'll pay the price. As we know, flying in and out of Canberra costs a fair bit more than any other city in Australia. For a long time it's been a bugbear. But will anything fundamentally change it and stop the gouging that you might feel?
Dr. Andrew Leigh is Federal Member for Fenner and Assistant Minister for Competition and Charities. Dr. Leigh, is it too much money to fly in and out of Canberra?
ASSISTANT MINISTER FOR CHARITIES, COMPETITION, AND TREASURY ANDREW LEIGH: Certainly an expensive route, isn't it, Adam? The cancellation rate is among the highest in Australia and this analysis that we've gotten out of Treasury suggests that there's a direct relationship between airline competition and how much you pay. When one airline services a route, then you pay on average about forty cents per kilometre. With two, you go down to go down to twenty-eight cents, with three you go down to nineteen cents. In other words, when you got three competitors on a route, then you're paying half as much per kilometre as when you've just got a single monopoly carrier.
SHIRLEY: In the end, if they are the providers and they rule the roost, is there anything that can be done by government, or any of us for that matter? It's not a simple case, I'd argue, of just shopping around.
LEIGH: There's a slots review taking place at the moment, Adam, which will be important in terms of ensuring that there is plenty of competition that occurs in the airline sector. One of the important things is that the monopoly airlines don't lock up slots and that we have plenty of vibrant competition. You can see this in Australian history, we actually had a vibrant, competitive airline industry before the Second World War. But in the decades after the war, the duopoly prevailed and that meant that most Australians just couldn't afford to fly. It was only when we've gotten more airline competition that airline travel has come within the reach of the average middle Australian household.
SHIRLEY: And third players have come and gone. You can reel them off. Well, Ansett was a biggie, it went down. Compass, Tiger more recently. I could name more and they don't exist anymore. Bonza is not flying in and out of Canberra either. Does it require government intervention, if we're talking Canberra, particularly?
LEIGH: In the case of Canberra, we've put a lot of pressure on the carriers to do a better job. The Government has been publicly critical of the high cancellation rate of Qantas flights on the Sydney-Canberra route, which had, I think it was an 8 per cent cancellation rate at one stage. I often joke to people that when you buy a Sydney-Canberra ticket, you're buying an option to fly in the event that the carrier decides there's enough other people that want to fly that route. And that's not good enough for the flying public. Prices are too high and that's why we've gotten the Competition Taskforce to look carefully at aviation alongside the other work that it's doing. And that'll feed into the Aviation White Paper that Catherine King is shepherding through.
SHIRLEY: You're speaking about this research that is being released today at a speech today. So, does it have an international focus as well? Getting in and out of Australia is expensive, especially in that of Canberra too. So, is that something you're going to attempt to deal with?
LEIGH: Absolutely, the Government's just updated the agreement with Turkish Airlines so they'll be flying 21 flights a week from early this year. That'll go up to 35 flights a week by next year. We're looking at ways of improving airline competition, I know there was a lot of publicity around the Qatar decision last year. We're very concerned to ensure that Australia has a vibrant, competitive market. It's an issue for Darwin. It's often said that in Darwin it can be more expensive to fly from Darwin to Sydney than Darwin to Singapore, even although Sydney's closer.
SHIRLEY: You mentioned the Qatar Airways decision. In hindsight, and it's an easy thing to use, I know, but was that handled poorly by the government or as best as possible? Because if you're talking competition and that lowering costs, the government intervened to basically reduce competition in this country.
LEIGH: Well, it's a decision that was made by the Minister in the national interests and I don't think people should -
SHIRLEY: How was it in the national interest, though? I'm really trying to understand that if we're talking directly about competition, more players pushing prices down, not up for consumers.
LEIGH: Look, it is generally in the interest of consumers to have more competitors, but there can be particular instances in which it's not in the national interest to improve movements.
SHIRLEY: Yeah. Has anyone explained that, though? I'd love to know why that decision was in the national interest specifically? Because it's one thing to say it as a blanket statement, Dr. Leigh, and I know it wasn't your call directly, but do you think people deserve to know exactly how that was in the national interest?
LEIGH: Well, the Minister has explained that and competition is an important factor, but it's not the only factor. The point that I'm making here, Adam, is that in an environment in which we have more than 3000 international movements a week, that a dozen flights from Qatar is significant but it's not the only factor in airline competition. I'd love to see Qatar flying directly into Canberra. After the Minister's decision, they decided to up their number of movements into Adelaide, where they're unrestricted. They're also unrestricted from more movements into Canberra. They were flying out of Canberra for a period then they stopped during the pandemic and they haven't returned. I'd love to see Qatar planes back on the tarmac in Canberra.
SHIRLEY: Dr. Andrew Leigh is our guest. He is the Assistant Minister for Charities and Competition. My name is Adam Shirley. How do you go affording an airline ticket or a term one in and out of Canberra and beyond, right now? Give me an idea on 0467 922 666. So, Dr. Leigh, government intervention, depending on how the industry reacts, do you have the power to intervene and would you and Catherine King and others consider it?
LEIGH: We intervene in a range of different ways, Adam. The Government has international airline agreements, and in terms of the domestic market, we manage the slots in order to place limits on airline noise.
SHIRLEY: I mean, on price regulation, though if we're talking escalating costs and customers being gouged.
LEIGH: The best way to bring down prices is more competition. That's why the Government's been so laser-focused on competition reform since we came to office. We've raised the penalties for anti-competitive conduct. We've banned unfair contract terms. We've set up the Competition Taskforce, and particularly in the grocery sector, we've got CHOICE doing quarterly price observations of the best supermarkets. We've got Craig Emerson, a former Competition Minister, reviewing the Food and Grocery Code. We're very alive to the value of competition in alleviating the cost-of-living crisis and the importance of competition for productivity and for economic growth. In Australia, the competition reforms of the 1990s were one of the reasons for that productivity surge and the benefits that flowed through in living standards. So, competition reform can raise living standards.
SHIRLEY: Dr. Andrew Leigh, do appreciate it and seeing what comes from this new competition research you're releasing today that's been done for the Government, what it might do for consumers who are trying to fly on a plane as a passenger. Thanks for your time.
LEIGH: Thanks for the chance to chat, Adam.