Allan Fels's Price Gouging Report

[Mickey Mouse]

Professor Fels accused Qantas of price gouging and made a direct link to the cost of living pressures being felt by Australians.

His report stated that Qantas fare increases over the three months to December 2022 were large enough to produce a sizeable increase in the "holiday travel and accommodation" contribution to inflation.

"A quarter of the inflation that month was mainly due to Qantas aggressively raising airfares, although Virgin may have also contributed," his report stated.

"Qantas' ability to reduce supply while increasing prices and suffering no material loss of market share, may have affected CPI in December 2022, and therefore may have impacted the Reserve Bank's inflation expectations and rate increases."

Qantas has suffered severe reputational damage in recent years but the airlines prices have remained high.(ABC News: John Gunn)

His report recounted some of the controversies that have surrounded the airline in recent years, including customer dissatisfaction and the blocking of Qatar Airways into the Australian market.

Professor Fels said the aviation sector was lacking competition and several policies and practices appeared to be making it difficult for a third player to enter the market.

"For example, restrictive slot allocation practices at major airports. These and other conditions need to be reviewed," he wrote.

He said there should be a third-party review of aviation competition.

Plus, on the break up of QF!

Qantas is one of the only businesses that Fels's report explicitly called out, and he is asked whether his proposed recommendation around divestiture powers should be used on the national carrier.

He says there is a case for the airline to be examined, as it was allowed to take over TAA without being scrutinised by the competition commissioner in 1989.

The best way to tackle rising airfares, he says, is by allowing for better competition in the aviation sector — and specifically give new entrants the chance to establish themselves "instead of imposing all of the slot allocation restrictions on them".

Professor Fels also thinks that prices charged to airlines by airports should be regulated, as there is an "absolute clear monopoly" at play there.

 

[Mickey Mouse]

(Above quoted from ABC reporting)

 

[Franky]

Plus, on the break up of QF!

I hope he didn't call it the 'national carrier'....

 

[jrfsp]

Nothing we didnt already know then

 

[oz_mark]

Actual report is here: https://www.actu.org.au/wp-content/uploads/2024/02/InquiryIntoPriceGouging_Report_web9-1.pdf

 

[Dr Ralph]

Unfortunately Fels doesn't have the best credibility.

 

[RooFlyer]

Unfortunately Fels doesn't have the best credibility.

A nice little backhander with nothing in support ....

 

[lovestotravel]

A report

That'll teach em

 

[drron]

I think the ACTU got exactly what they wanted.
As with Royal Commissions first pick your judge.

 

[justinbrett]

If the government hasn't used divestiture powers to break up Coles & Woolies and the absolute behemoths they've become, can't see the government even considering touching the airlines.

Meanwhile NZ have threatened it for their supermarkets, but seem happy to maintain an airline monopoly. In terms of cost of living pressures, the former is far more critical to the most venerable.

Accounting for inflation, flying is cheaper today than it was when Fels was running the ACCC. Cost of staples like bread and milk, not so much.

 

[yachty]

Against my better judgment I had a read through the aviation section.

It's hard to take it seriously. Lots of loaded language and accusations. Statements are hand-wavy (things happened "some years ago"). Sources for claims are light on or not cited at all.

I don't think anyone proofread it either.

 

[MELso]

Unfortunately Fels doesn't have the best credibility.

Brand Fels is standing up for the consumer so will need to do things that are seen to do this. This helps him get the next gig from someone who needs a 'pro-consumer' advocate. (I got to see this up close when working for him a few years ago.)

 

[Lynda2475]

If he is claiming QF is responsible for 25% of all inflation for the quarter I call bs. Travel spend as a portion of overall spend is not material for most. Airfares at Christmas are always pricier across all carriers, and except for a handful of domestic routes, there are competitors on all routes. Further few pay the last minute prices, most book Xmas travel more than 3months out.

IME increases last year on price of supermarket goods, electricity/gas/water, insurance, council rates and public transport all far higher. My QF flights syd-cns for last xms/new years period were give or take $1-5 essetially the same price as the year before and the year before that, but I'm sensible and don't book last minute.

My grocery bill and utilities OTOH at least 35% higher.

 

[tdimdad]

My grocery bill and utilities OTOH at least 35% higher.

That's because you buy your groceries at the last minute. Should buy them a year in advance...

 

[dajop]

If the government hasn't used divestiture powers to break up Coles & Woolies and the absolute behemoths they've become, can't see the government even considering touching the airlines.

I guess though the difference is that neither WW nor Coles owns Aldi.

In the airline business it’s clear that there’s room for 3 players on the major routes. But two of the main players (#1 and #3) are owned by one company. It would probably much easier for a willing government to force QF to divest JQ than the breakup of WW or Coles, where it isn’t quite so obvious where the split up would be. I think WW have 37/8% market share, considerably lower than Qanstar.

 

[justinbrett]

I guess though the difference is that neither WW nor Coles owns Aldi.

In the airline business it’s clear that there’s room for 3 players on the major routes. But two of the main players (#1 and #3) are owned by one company. It would probably much easier for a willing government to force QF to divest JQ than the breakup of WW or Coles, where it isn’t quite so obvious where the split up would be. I think WW have 37/8% market share, considerably lower than Qanstar.

Is it though? We’ve never had three major airline companies - every time we’ve had that one has gone bust.

The only way we broke out to this was QF’s dual brand strategy which has resulted in lower airfares and forced VA to compete on both ends of the market.

This might not be good for VA but it’s good for the consumer as there is competition on both ends of the market. JQ doesn’t stand as an independent company and its costs would blow out after a divorce with QF. Without the financial backing that would make JQ a much weaker airline.

Of course Coles used to own Bilo…. The difference is unlike Coles, QF is almost at zero risk of absorbing the JQ brand and rolling into QF, quite the opposite, most of the JQ business today used to be QF route and aircraft prior to it forming.

 

[Happy Dude]

If he is claiming QF is responsible for 25% of all inflation for the quarter I call bs. Travel spend as a portion of overall spend is not material for most. Airfares at Christmas are always pricier across all carriers, and except for a handful of domestic routes, there are competitors on all routes. Further few pay the last minute prices, most book Xmas travel more than 3months out.

IME increases last year on price of supermarket goods, electricity/gas/water, insurance, council rates and public transport all far higher. My QF flights syd-cns for last xms/new years period were give or take $1-5 essetially the same price as the year before and the year before that, but I'm sensible and don't book last minute.

My grocery bill and utilities OTOH at least 35% higher.

Are council rates and land tax being included in the investigation? They're a monopoly too. Vic gov tells me, with a straight face, that my IP has increased in value 40% in the year 2022 - 2023, when I asked why my land tax has nearly doubled. These are often left out of the discussion about greedy landlords. My insurances have shot up too so I always compare.

 

[RooFlyer]

JQ doesn’t stand as an independent company and its costs would blow out after a divorce with QF.

That would be an interesting scenario to look at. I think it could go either way for JQ. Although Qantas has had a good shake at reducing its cost base, is still has a lot of inherent legacy airline overheads that it would farm out to JQ. I doubt JQ management is completely free to do what they like, independent of what the Qantas board wants.

JQ would undoubtably benefit from Qantas' larger treasury operations, amongst other things.

 

[moa999]

Jetstar is obviously big enough to stand on itself these days, but would need to add functions that Qantas Group provides like treasury, IR, aircraft purchasing, none of them cheap.

But the biggest issue would be losing access to Qantas FF program if it were forced to fully separate. Rebuilding that would take a long time.

But more importantly I don't think it would reduce fares. Jetstar these days competes on many routes with Qantas and is a lower price option and broadly serves a different market.

People also haven't mentioned Rex and Bonza which arguably together provide a bigger competitor than many 3rd operators in the past (eg Compass I and II).

Reality is global airfares and accommodation costs are still high at the moment because the industry lost $$$s over the Covid shutdowns and are still trying to recover that so they can buy new aircraft, refurb aircraft and hotel rooms etc.

Fels comments about TAA and Qantas are laughable. They didn't compete in those days
TAA (later Australian) and Ansett had a domestic duopoly, and Qantas had an international monopoly.

 

[dajop]

Have to laugh at this thread though. Objectively speaking there has been many issues raised in here and elsewhere about Qantas’s domestic market dominance. But because the person undertaking the report perhaps has different allegiances, the report is broadly mocked.

No skin in the game either way, but do find it amusing and whilst some of the report seems a bit OTT I would say where there’s smoke there’s fire.

Having said that Australia is the land of the duopoly. But let’s hope Rex can make inroads. (Forget Bonza they’re just tinkering at the edges).