17/09/2020 - 13:00

ACCC to monitor Qantas, Virgin and REX

17/09/2020 - 13:00

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Australia’s top competition body will closely scrutinise the domestic flight market as restrictions have led the nation's major airlines to consider strategic overhauls.

Qantas has forcefully lobbied state governments across Australia to loosen border restrictions imposed at the height of the COVID-19 pandemic. Photo: Gabriel Oliveira

Australia’s top competition body will closely scrutinise the domestic flight market as restrictions have led the nation's major airlines to consider strategic overhauls.

That came as part of the first in a series of reports examining competition between Qantas, Virgin Australia and REX in the domestic market.

The report listed nine behaviours it considered damaging to competition, including dumping flights into the market to artificially lower ticket prices, or offering tickets at uncompetitive prices to drive competitors out of the market.

Australian Competition and Consumer Commission chair Rod Sims said it was critical that, when the industry started scaling-up domestic flying, any potential damage to competition was identified quickly and acted on.

“A lot has changed since the treasurer directed us to take on this new role in June,” he said.

“Domestic airline travel was expected to be on its way to returning to more regular operations by now, but infection spikes in some states and tighter border restrictions have delayed the recovery.

“Australia’s domestic airline industry over the next few years may look quite different to the one that went into 2020.

“Air travel is vital for the economy in a country as large and geographically dispersed as Australia.

“Competition must be safeguarded through this period so our domestic airline industry can meet the needs of consumers and the economy more broadly.”

The nation’s airline industry has taken a significant financial hit since the COVID-19 pandemic grounded most international travel and limited domestic tourism.

Virgin Australia was the first major casualty when it entered into administration in April.

That followed years of financial difficulties for the airline, including a $71 million loss in the 2018-19 financial year.

The airline was sold by administrators to Bain Capital earlier this month, with the US-based investment firm flagging redundancies and a shift towards operating as a budget-price airline.

NSW-based airline Regional Express (REX) has reportedly begun considering whether to service routes that Virgin Australia Holdings has cancelled in recent months.

REX on Monday confirmed it will be required to submit monthly reports to the ACCC alongside Virgin Australia and Qantas Airways about any potential expansion into routes abandoned by its competitors during COVID-19.

The airline, which generally services the country’s regions, has also reportedly begun considering whether to fly routes between major cities on the east coast.

Those reports led Qantas chief executive Alan Joyce to accuse the airline of using federal government subsidies to fund its own expansion.

REX received $62 million in federal subsidies in the previous financial year.

WA stands firm on borders

Today’s announcement comes as Qantas has forcefully lobbied state governments across Australia to loosen border restrictions imposed at the height of the COVID-19 pandemic.

Mr Joyce has campaigned for all states to relax border restrictions and instead adopt a model that recognises and quarantines infection hotspots.

While some states have shown a willingness to accept this framework, Western Australia has been resistant, likely owing to its relatively low caseload of COVID-19.

WA has recorded no instances of community transmission of the virus since April, with just four active cases being monitored, according to the Department of Health.

All of those cases are from returned overseas travellers in hotel quarantine.

Qantas was trading at $4.04/share at 1pm AEST.

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