A liberalisation too far?

In 2000 Virgin Blue – then 100 per cent owned by Sir Richard Branson – launched Australian operations and Tiger Airways followed in 2007.

Allowing any overseas airline to operate domestic services would allow, for instance, Indonesian airlines – currently banned from the EU – to operate domestic services without an Australian AOC, something that many would never achieve.

It also introduces the situation whereby an Indonesian flight attendant who earns at best $500 a month would be competing with and undermining an Australian flight attendant who earns $4000 a month.

It is enough that Australian airlines must compete with some overseas airlines that have lower wages and standards without those airlines plundering the domestic routes.

The balance, argues DFAT, is that Qantas can fly on domestic routes in Asia.

It would be a stretch to think that Qantas could compete with its Australian paid crews on Indonesia’s domestic network with its rock bottom fares, and many countries/ states in Asia have no domestic network at all, or none worth bothering with.

Certainly, the Australian government could cherry pick the foreign airlines we want to operate domestic services in exactly the same way that those airlines will cherry pick the best trunk routes, significantly damaging the complex cross subsidising of regional routes by the simple virtue of eroding the critical mass of the incumbent airlines.

The policy suggestion is also flawed in that many foreign airlines would be operating from international terminals and domestic passengers would be reluctant to endure the additional processing hassles.

DFAT also raised the foreign airlines on the Pacific route argument, but that ignores the fact that Air New Zealand, Continental Airlines, and Northwest Airlines have all withdrawn from the route because they couldn’t make money.

V Australia has made a major commitment to the trans Pacific route with an order for up to 14 777-300ERs and must be given at least five to eight years to secure a foothold in the market and secure a return on the investment.

A number of airlines are pressing for access to the route and perhaps a solution is to offer routes where Qantas and V Australia do not operate. Cairns-Los Angeles or Sydney-Seattle would test the commitment to further Australia-US tourism.

Last year Transport Minister Anthony Albanese watched from the opposition benches the ill conceived Aviation Partners Australia (APA) attempted buyout of Qantas fail on greed.

And in November Australians saw a snapshot of what may have transpired if the deal had succeeded with Allco Finance, one of the major APA stakeholders, collapsing.

The APA bid focused the government and Australians on the critical importance of Qantas and Australian airlines in general to the economy, and that soul searching must not be lost.

While airlines are businesses there is a significant public utility expectation, particularly in times of natural and man made disasters both in Australia and overseas, while there is an ongoing expectation that Qantas will serve many marginal routes in the public interest.

Some overseas airlines have demonstrated a commitment to Australian tourism, many have not.

DFAT touts lower fares as justification for the liberalisation, but Australians already enjoy some of the lowest fares in the industralised world while savouring unquestionably the world’s best domestic airline service. Australians also benefit from financially strong airlines with massive order books and a world leading focus on safety.

Australia is already well ahead of most countries on the liberalisation front, allowing foreign airlines to compete on domestic routes once they secure an AOC. Thus we should wait until the rest of the world, particularly the United States, catches up before embarking on further open skies initiatives.