Coalition calls for govt to have divestiture powers over airlines
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The news: Shadow Minister for Infrastructure, Transport and Regional Development Bridget McKenzie has called for Treasurer Jim Chalmers to introduce divestiture powers for the government over airlines as part of a federal review into competition policy.
The context: The federal government’s two-year competition review was announced in August 2023. The review does not focus on abuse of market power and the competition impacts of divestiture.
A recent Treasury paper on competition in the airline sector found there was a strong line between competition and airfares in aviation. In regional and remote flight routes there was the strongest effect in terms of price reduction when the number of airlines increases. It found that competition saved consumers between $27.2 billion and $35 billion over the past 14 years. One extra airline on a route drives airfares down 5% to 10%.
In November, the government directed the Australian Competition and Consumer Commission (ACCC) to monitor domestic air passenger transport. An August report from the ACCC focused significantly on the recent collapse of Rex Airlines and withdrawal more intercity routes, which means no routes are covered by more than two airline groups. It also looked at Bonza going into liquidation in July.
The Coalition announced back in July that it was committed to divestiture legislation as a “last resort” option to use against supermarkets, specifically, when they had been found to have taken part in uncompetitive activities. The Greens have long supported divestiture powers. Labor has been opposed.
There has been a notable shift away from supporting big business from both sides of government over the past 12 months amid concerns about price gouging and corporate virtue signalling, with small business becoming more of a focus.
Former ACCC chair Allan Fels has been among those supportive of giving the competition watchdog extra divestiture powers to break up businesses that become too dominant and are find by court to have abused market power. Fels undertook a report commissioned by the Australian Council of Trade Unions into price gouging and competition.
He found that Qantas’ rebound post-pandemic was largely due to government support during lockdowns. He encouraged the government to deal with “serious restrictions on competition” in its discussion paper on future aviation policy, which followed the blocking of Qatar airlines into the Australian market by the government.
McKenzie noted in an opinion article in the Australian Financial Review that the government had “originally carved out aviation” from the review, but put it back in amid criticism over the Qatar situation.
What they said: "The treasurer [Jim Chalmers] will have failed another reform opportunity unless he deals with divestiture as a measure to ensure consumers’ interests are protected, and not at the mercy of the entrenched duopoly, and the proper role of divestiture," McKenzie said.
"His competition review will be a failure if it does not address the role of divestiture in the Australian aviation sector," she said.
Minister for Environment and Water Tanya Plibersek said on Sunrise today that the Coalition only had "one idea" in pushing for powers to break up big businesses.
"What we actually have to do with the airlines is make sure that takeoff and landing slots, there's more competition there. The previous government got a report years ago recommending just that. We're implementing it right now," she said.
The source: AFR
