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Aviation: Bringing Light through Clouds

U.S. Supreme Court Justice Louis Brandeis once said sunlight is the best of disinfectants.

Qantas is set to face its share of sunlight as a Senate inquiry gets under way and the early exit of boss Alan Joyce fails to stymie concerns about the aviation sector.

Justice Brandeis was also a leading critic of monopoly corporations, believing they harmed workers and business innovation.

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Justice Brandeis called it the “curse of bigness.”

RMIT associate professor of finance Angel Zhong says Australia’s airline industry “resembles a cosy oligopoly, where a select few airlines wield significant influence over the market.”

At a domestic level, Qantas and Virgin represent 95.1 percent of the market.

In terms of international flights, while there are 100 air services agreements, Qantas accounts for 26.1 percent of the market and Virgin Australia 6.7 percent.

There are concerns the federal government is being anti-competitive with its decision to block Qatar Airways from accessing 28 extra flights per week to Sydney, Melbourne and Brisbane on top of its existing 28 weekly services.

Transport Minister Catherine King insists it was in the national interest and in line with previous governments.

“The decision to block Qatar Airways’ entry under the grounds of national interest would hold water if Qantas were on the brink of collapse, thus necessitating the blockade as a bailout measure,” Dr. Zhong said.

“However, there is a glaring absence of information explaining how the blockade safeguards national interest, especially when it only appears to impede Qantas’ competition and increase flying costs for the public.”

Even before the Qatar Airways decision, consumers were grumpy with the Flying Kangaroo’s handling of ticket credits.

Qantas had given passengers a deadline to claim the credits, but decided to keep it open indefinitely after a huge backlash.

A 50 percent flight delay rate in 2022 has done little to lift confidence and the company’s share price has slumped in recent months.

Dr. Zhong says accountability and transparency will be crucial for the airline’s future.

The appointment of CEO Vanessa Hudson offers a chance for a reset, greater engagement with customers and a focus on transparency.

“The company has a unique opportunity to rebuild trust and revitalise its reputation from a clean slate,” Dr. Zhong said.

One winning trajectory for the airline is to focus on what finance academic My Nguyen describes as balancing profitability with ethical responsibilities to workers, customers, and the public.

“One possible way to design such a strategy is to use the triple bottom line framework, focusing on profit, people and the planet—this can urge businesses to consider social and environmental impacts alongside financial gains,” Dr. Nguyen said.

“Looking at their recent actions, it’s not hard to see how they have focused only on profits.”

In late-2022 the minister in charge of competition, Andrew Leigh, gave a speech in which he talked about the “New Brandeis Movement.”

The thrust of the movement, said Dr. Leigh, is excessive market concentration can harm consumers and dampen dynamism.

Dr. Leigh spoke in more detail about the aviation sector—which will be reviewed through a green and white paper process—at the National Press Club in August.

“I remember as a kid, the people who flew overseas to take a holiday were the very rich,” Dr. Leigh said.

“We’ve seen a change now where many middle-class Australian families can afford an overseas holiday.

That’s partly income gains. It’s partly also because the real price of airfares has come down.

“I look to Europe with its range of low-cost carriers and see what looks like an even more competitive ecosystem.”

Senators will also weigh in at a parliamentary inquiry.

Nationals Senate leader Bridget McKenzie wants to know why Qatar Airways was blocked from providing additional air services, accusing the government of “standing in the way of cheaper airfares.”

The inquiry will report back to the Senate on Oct 9—just ahead of holiday makers seeking some extra sunlight after a long winter of discontent.

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