CBASA – Tuesday 19 September 2023
Airline Intelligence and Research
Dr Tony Webber, Managing Director
Senator BABET: Thank you very much, Dr Webber. You’re obviously an expert in aviation competition and economics. You spent some time at Qantas, as well, as their chief economist. Recently, former Treasurer Peter Costello said that Qantas is one of the most powerful players in Canberra and that he could not fathom why a decision was made by the Albanese government to restrict their rival—Qatar, obviously—from increasing flights into Australia. Do you believe there is an unhealthy relationship between Qantas and the Australian government that damages everyone else but keeps Qantas protected in a cocoon of profits, so to speak, and continued business growth? What are your thoughts?
Dr Webber: I don’t think any business should be protected, including Qantas. I think that, once you protect one business, other businesses will feel like they also need to be protected. Whether it’s happening or not, I don’t know—I’m just not privy to it. I didn’t deal with that part of Qantas in any significant way. But, certainly, if Qantas is receiving more protection than other businesses, that can’t be helpful for the Australian economy.
Senator BABET: In your opinion, from what you can see from the outside, does it seem that way to you or not?
Dr Webber: Yes, it does seem that way.
Senator BABET: I believe the transport minister, Catherine King, recently made statements that Qatar can increase its flights into Australia through regional secondary airports like Adelaide, Cairns, the Gold Coast, Darwin, Canberra et cetera. Economically, would these destinations be viable in comparison to major airports like Sydney or Melbourne for airlines like Qatar?
Dr Webber: Eventually they may be, but not at the moment. They’re just too small. Airline economists call it the thickness of routes. Those routes aren’t thick enough; the demand’s not thick enough. So the only commercially viable routes at the moment, particularly as we’re coming out of COVID, will be Sydney, Melbourne, Brisbane and Perth.
CHAIR: Thank you. Great questions, Senator.
Mr Michael Bradley, Managing Partner
Senator BABET: I have a couple of questions here for you, Mr Bradley. A representative from your firm has publicly stated—I think it was last week—that Qatar Airways have to take responsibility for the incident that happened. Can you explain how the airline should be taking responsibility, in your view, from a legal or otherwise perspective—human rights et cetera? What do you think should happen to them?
Mr Bradley: We think that the airline should step up and accept its responsibility for what happened to our clients and offer some accounting for that. Clearly our clients are entitled to be compensated. They would like an apology. They would like some assurance that this isn’t going to happen to anyone again. They would like something other than the brick wall that they’ve faced from the airline so far.
Senator BABET: My next question is: how can an airline be responsible for the actions of potentially local police in a country? Is it not a risk that all travellers could take in respect of laws in foreign countries when they’re travelling?
Mr Bradley: In the case, we allege that the airline has liability for what happened, and that’s a matter that will ultimately be tested in court, if it goes that far. I can’t really respond to that hypothetically.
Senator BABET: Potentially you or someone from your firm said to ‘hold the line’ or something of that nature with regard to the decision to deny Qatar additional flights into Australia. What did your firm mean by ‘hold the line’?
Mr Bradley: Our clients support the decision that the government made and consider that to be the right decision, so I assume that’s what that means.
Senator BABET: Do you think that the government is using your clients as a bit of a smoke screen in order to deny Qatar Airways access to Australia?
Mr Bradley: I have no insight into what the government is doing.
CHAIR: Neither do we.
Senator BABET: In your personal opinion? Is your gut feeling telling you that or not?
Mr Bradley: I don’t have a view on that.
Senator BABET: Okay.
Flight Centre Travel Group
Mr Graham Turner, Managing Director, and Chief Executive Officer
Senator BABET: You recently told ABC radio that the decision around Qatar Airways could end up blowing up on the government. You said, ‘There is no logic to it and it is a bit of a worry because we have more demand than capacity.’ This decision clearly doesn’t benefit Virgin due to its code-sharing agreement with Qatar. It doesn’t benefit consumers to have less competition. In your opinion, do you believe that the interests of Qantas have been favoured over other providers?
Mr Turner: It would appear that way. Bear in mind that Qantas doesn’t make these decisions; the government makes these decisions. I know Alan Joyce fairly well. I know Qantas is very good at lobbying governments, not just this one but the previous government as well, and it is their right to do that. The government makes the decision, so I don’t blame Qantas for this at all.
CHAIR: Do you blame the government?
Mr Turner: Well, they make the decision.
Senator BABET: You mentioned before that you would have thought if Qatar was able to expand its operations in Australia we potentially could see a 15 per cent decrease in airfares for the consumer. In a cost-of-living crisis, do you think that this decrease in cost would be welcome by people looking to travel both domestically and internationally?
Mr Turner: Obviously, it would. Somewhere around that 10 to 15 per cent decrease with those 21 extra flights would be about the figure from where it is now. That is my opinion. I think Dr Webber would probably halve that.
Senator BABET: In your opinion, why do you think the government’s transport minister decided to block Qatar from increasing its operations?
Mr Turner: I don’t know. There have been a lot of reasons put forward—the national interest. Frankly, I do not know. If the government does anything for the travel industry generally, we like to know what the reason was. There has to be a dominant reason; we just don’t know what it was. I know there is a story out there about protecting Qantas. I think it probably runs a bit deeper than that but it would be interesting to hear from the minister what the reason was. There might be more than one reason.
Senator BABET: You mentioned the national interest. That is important because the government has mentioned this quite a few times. What do you think the national interest is in regards to this? Because I have no idea.
Mr Turner: It is pretty obvious, we believe, it is in the national interest to approve those 21 extra flights, particularly, as was mentioned before, given Virgin’s code share. Virgin don’t fly internationally much, so they would get quite a bit of benefit out of the domestic on-travel, which would help their people employ more people in that. There’s no doubt in my mind that economically it’s in the national interest to approve those.
Senator BABET: The minister actually meant it was in the national interest not to approve Qatar for any more flights into Australia. That blows my mind. Do you think that this decision should potentially be looked into and maybe reversed?
Mr Turner: The travel industry generally would love this decision to be reversed. If you notice, this story about extra capacity is now six weeks old or more, and it’s not going away. I think it’s in the government’s interest to reverse this decision. It’s in the national interest. I don’t think there’s any doubt about that.
Senator BABET: I’m sure you’ve seen in the news recently that Prime Minister Albanese’s son was given a pass to get into the Chairman’s Lounge, which is usually restricted to high-level corporate clients, senators, members of parliament et cetera. Do you think that shows bias from the government?
Mr Turner: I am a member of the Chairman’s Lounge, but I think—
Senator BABET: You’re the chief executive, though, of a large corporate. Mr Turner: I don’t know. I think generally, as you know, with the Chairman’s Lounge there’s no exact criteria why people get in. I would be very surprised if that was any sort of a reason or part of a reason that the Qatar decision was made. I think it’s far more important—
Senator BABET: Do you think it shows bias, though?
Mr Turner: It’s probably something that is regretted—I’ll put it that way.
Mr Geoff Culbert, Chief Executive Officer
Senator BABET: You mentioned that Qatar are using all 28 of their slots. Is that correct?
Mr Culbert: Yes, that’s right.
Senator BABET: And there are 84 slots not being used right now?
Mr Culbert: That’s correct.
Senator BABET: Who has the 84? Who’s hoarding them—and are they hoarding them?
Mr Culbert: It’s not necessarily hoarding. I think we have to differentiate between slot hoarding, which is where you actually have a slot at the airport and you’re not using it, and a bilateral right that permits you to fly into the country, where you would have to get a slot to be able to use that bilateral right. What we’re seeing at the moment is a scenario where there are 168 flights permitted from the UAE but only 84 of those are being used. There are 84 flights that could be used in addition, and that would be primarily Emirates and Etihad. But, in order for them to actually use those spare rights, they’d have to get a slot at Sydney airport.
Senator BABET: So basically there is capacity there for Qatar to take more flights in and out?
Mr Culbert: Not for Qatar, because Qatar is full at 28. The capacity is there for Emirates—
Senator BABET: If increased.
Mr Culbert: Yes. But the capacity is there for Emirates and Etihad should they wish to use it. I would note that our expectation is that it’s unlikely that that additional capacity would be taken up by Etihad and Emirates. Etihad in particular has gone through a lot of structural change, and our expectation is that they won’t increase capacity into Sydney airport for another five years.
Centre for Aviation (Formerly)
Mr Peter Harbison
Senator BABET: You’ve got tremendous experience in the aviation sector over many years. What are your personal views of the decision by the transport minister, Catherine King, to block additional Qatar flights into major Australian capital cities? Do you think she made the right decision in the national interest—as they keep claiming—or not?
Mr Harbison: There’s a simple response to that, which is: what is the national interest? Who decides what the national interest is? Presumably it’s the government of the day. Do I think it was a good idea? No, I don’t.
Senator BABET: Was that a no?
CHAIR: Yes, it was a very emphatic no.
Senator BABET: It was a firm no.
CHAIR: Yes, a firm no.
Senator BABET: Do you think that potentially this decision should be reversed or looked at? I’m assuming that’s a yes.
Mr Harbison: Basically, yes. To go behind it, all of the discussion so far has been about high fares in the market. As I said at the beginning, we’ve been through an exceptional period and we’re still in it, particularly during this past northern European summer—our winter—which is a peak season. It’s a peak season where demand experienced a surge after COVID and where airline capacity was short. As I said then, if you check out what the fares are in a month’s time they’re right back down to where they used to be. I’m not sure that will stay forever. However, if you want to justify Qatar coming back in because there’ll be lower fares, it doesn’t work. There’s an awful lot of low fares coming in. But do I think they should be in? Yes, of course. Etihad has cut back substantially on its services and I don’t think they’re going to come back. It would really just be restoring the situation that existed previously.
Senator BABET: With regard to international freight in Australia, what’s the demand like? Are our domestic and international carriers coping or do you think we need more freight services?
Mr Harbison: Again, we’ve had an exceptional period. We had a massive surge of freight, particularly small packages, during COVID. It’s actually diminishing quite rapidly at the moment and it’s going to level off at a lower level. I think demand is where supply is. There’s not a massive imbalance there at the moment.
Senator BABET: Qantas has been in the news for quite a while now for treating its customers in a less than ideal way. Do you think that an increase in competition in Australia from companies like Qatar and others could potentially see Qantas treat their customers in a more favourable way?
Mr Harbison: We’re talking two markets—domestic and international. Internationally, there are so many carriers flying to Australia that one more having a few services isn’t going to make much difference. If I could turn it around a bit, I think what’s happened in this last year in terms of consumer protection is a drastic failure on the part of governments because we don’t have consumer protection regulations and we should have had them many years ago. Something really has to change quite drastically there. That’s really the way to fix this. If you punish airlines for misbehaving, they tend not to misbehave.