The first is that increased competition in a highly concentrated market should trump Qantas’ financial performance if national interest is at the heart of the decision.
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It must be remembered that the government chose not to bail out Qantas’ arch rival Virgin – leaving it to handle the ravages of COVID that led it to bankruptcy.
The second is that Qantas doesn’t need a leg up from the government to ensure its financial strength or viability.
Where were Prime Minister Anthony Albanese and Transport Minister Catherine King last week, when Qantas reported a near $2.5 billion profit, smashing its previous record?
Did they not notice that the airline’s international division posted an extraordinary $906 million in earnings before interest and tax – a result that was in part achievable due to the elevated fares customers were paying?
Compare this with the international division’s performance in the 2019 financial year (the last full year before COVID), when it made $285 million.
Even more strikingly, it made this profit having flown around 45,000 available seat kilometres last year, which was far less than the 69,000 it flew in 2019.
This explains why the government has been floundering with various explanations over the past few weeks about its motives for denying the public the additional services from Qatar – a move that any half-decent economist will attest would lower international air fares.
To be sure, the additional competition that Qatar would inject into the market would put some pressure on Qantas’ fares and the profitability of its international division, but it wouldn’t make a giant dent. Qantas would still have the capacity to invest in its fleet renewal.
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The government’s move has understandably led people to wonder why Qantas has become a protected species when there has been a generalised push to challenge and regulate the oligopoly-plagued Australian business landscape.
People are also justified in asking why the government has made a decision that will perpetuate higher airfares when it is attempting to alleviate the cost-of-living crisis and inflation.
Former Australian Competition and Consumer Commission chairman Rod Sims likened decisions on international bilateral flying rights to the old tariff negotiations, where protecting home-based companies and industries often trumped improving competition.
“You need more explanation” from the government, he said. “I can’t see what its logic is when airfares are sky high.”
Don’t hold your breath.
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