iscover
Sydney Airport’s CEO has told major airlines to use their take-off slots or let other carriers have them as domestic traffic continues to languish.
In his most significant intervention yet, Geoff Culbert has pointed the finger squarely at airlines for Sydney’s lagging domestic recovery, which saw passenger numbers grow just 1.2 per cent year-on-year to 1.90 million travellers in June, representing a 90.6 per cent recovery rate on June 2019 traffic.
It comes after the ACCC in June argued that larger airlines “can exploit” slot rules to stifle competition from smaller carriers, with both Bonza and Rex arguing the system is putting them at a severe disadvantage.
A slot is a literal time slot that allows an airline to take off at a specific airport at a particular time.
Australia’s current system for allocating them attempts to shield airlines from having to unexpectedly cancel flights as well as increasing competition domestically, ensuring no one operator holds a monopoly over the best times.
Currently, an airline can hold a timeslot at an airport indefinitely as long as it flies it 80 per cent of the time, allowing carriers to cancel up to a fifth of flights and maintain a monopoly.
It has led to accusations from critics that airlines take slots they do not actually need as there is a huge buffer to cancel so many of them, forever blocking out rivals. Both Qantas and Virgin Australia, though, have strongly denied they are gaming the slot system.
However, on Thursday, Culbert blamed steep airfares and “high cancellation rates on popular domestic routes” for suppressing passenger demand.
“In the 12 months to June, passenger numbers on the Sydney to Melbourne route were just 81 per cent recovered compared to pre-pandemic levels, while numbers between Sydney and Canberra were only 64 per cent recovered,” he said.
“It will be interesting to see if this is a long-term trend. If incumbent airlines have decided to fly less between key domestic markets, then they should relinquish slots to domestic and international carriers who want to operate out of Sydney Airport and provide more choice for customers.”
In contrast, 1.16 million passengers went through the international terminal in June, a 66.7 per cent jump year-on-year and an 88.8 per cent recovery rate on June 2019.
Chinese traffic, in particular, is now at 69 per cent of June 2019 numbers, up from a 54 per cent recovery rate in May and 22 per cent at the start of the year. Chinese nationals are now the third largest group of international passengers using Sydney Airport.
According to Culbert, the international recovery is now close to surpassing the “largely stagnant” domestic recovery.
“While June domestic passenger numbers were almost on par with June last year, international traffic is gaining momentum and was up 66.7 per cent,” he said.
“International passenger numbers are now closing in on pre-pandemic levels with strong demand on the mainland China route helping drive the recovery.
“To see the Chinese visitor market 69 per cent recovered within six months of the border reopening is a phenomenal result. As demand grows, the seven Chinese carriers operating out of Sydney are continuing to add capacity, with 51 return services now flying weekly.”
The news follows months of controversy over Sydney’s slot system, which is particularly vulnerable given the airport is operating at near full capacity.
According to Culbert, Qantas last season filed for 106 per cent of its pre-pandemic capacity, while Virgin filed for 95 per cent. This has left other airlines shut out of the slot booking process.
“The actual number of flights flown will be significantly lower than that because of the cancellation rates on the Sydney-Melbourne route,” he told The Australian in March.
“They’re running at about 10 per cent, (whereas) the national cancellation rate is 3.9 per cent, so all the data indicates there is over-filing and that does prevent airlines from getting access to Sydney Airport.”
New entrant Bonza has also come out swinging against the 80-20 rule, saying it is shutting out competition.
Speaking to the House Standing Committee on Economics last month, Bonza CEO Tim Jordan described what he sees as a massive opportunity in Sydney that Bonza is unable to access owing to issues with the airport’s slot system, which he has previously called the “biggest single issue” in domestic aviation.
“Sydney, from a catchment perspective, is getting close to a quarter of the population – between 20 and 25 per cent of the total market. If we as a business are unable to access that market, it has a significant impact on us and our ability to bring low fares,” he told the committee.
“We see the opportunity to open up many new markets into and out of Sydney, which are currently serviced by one stop, whether that is via Melbourne, Brisbane, or other ports.”
The situation is further complicated because the slot rules were hugely relaxed during COVID-19 as lockdowns and border closures caused hundreds of cancellations, but have since been criticised by both Rex and Bonza as stifling their ability to run services at the most popular times.
The slot rules were ironically introduced by Rex deputy chairman John Sharp when he was transport minister. He has told Australian Aviation he now thinks the rules are outdated and are in need of an overhaul.
David Savage
says:I agree. Time slot and gate access has been the main weapon of the airlines far too long. They need to use it or lose it. Reapply and get in the queue. If they cry long term planning, then set a quota with access for the smaller players who handle most of the traffic. Or, give long haul a better curfew option for a price.