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8 February, 2024

Qantas’ exorbitant airfares may have contributed to inflation: Report

Qantas Airbus A380 at London Heathrow airport. Qantas is the flag carrier of Australia and has 12 A380s in fleet.

Edited by Travel Weekly

An inquiry by the Australian Council of Trade Unions has found that Qantas reducing its domestic capacity and upping airfares in 2022 may have contributed to inflation and raised interest rates.

The inquiry, which was led by former Australian Competition and Consumer Commission (ACCC) chairman, Allan Fels, examined price gouging across the Australian economy and found Aussies are paying too much for everything from groceries to travel.

The company that found itself named and shamed in the travel industry was the National Carrier.

“Qantas’ ability to reduce supply while increasing prices, and suffering no material loss of market share, may have affected CPI [inflation] in December 2022, and therefore may have impacted the Reserve Bank’s inflation expectations and rate increases,” Fels said in the report.

Fels lambasted the aviation duopoly in Australia, which is dominated by Qantas, arguing that the ACCC should have more power in order to tackle anti-competitive behaviour. Currently, Qantas Group and Virgin Australia own over 90 per cent of the commercial aviation market in Australia.

Qantas and Virgin Australia comprise the Australian aviation duopoly (iStock/BeyondImages)

“Changes to the competition law could be done very quickly,” Fels said. “That could be done, introduced into parliament within two or three months.”

Qantas cut its domestic capacity by 10 per cent in May 2022. The airline said it was “adjusting its domestic capacity levels for much of FY23 to assist with the recovery of sustained high fuel prices”. Qantas then went on to cut capacity by a further 5 per cent in July and August and by another 10 per cent in October.

Fels argued that Qantas’ reductions hurt particularly badly at this time because of revenge travel’s surge, contributing towards inflation.

“Qantas fare increases over the three months to December 2022 were large enough to produce a sizable increase in the ‘holiday travel and accommodation’ contribution to inflation,” Fels said.

Fels said the most egregious example of price gouging was that Qantas’ airfares were 30 per cent higher due to the Albanese Government’s controversial decision to block additional capacity for Qatar Airways.

“Well, where do you start? I thought the Qantas airfares were 30 per cent higher because of the blocking of Qatar,” Fels told ABC.

“[But] with airlines there is room to quickly remove the anticompetitive restrictions that apply both domestically and international.”

Qatar was looking to add 28 flights per week into hubs such as Brisbane, Sydney, Melbourne and Perth from the Middle East in July last year, but this was blocked by Transport Minister Catherine King.

The Federal Government sought out the opinion of Qantas as part of Qatar Airways’ application process for bilateral air rights. Qantas opposed the bid on the grounds that it would cause Australian job losses, according to The Australian.

Qantas has responded to Fels’ report, arguing that “the temporary spike in fares post-COVID reflected reductions in capacity to improve operational resilience following the challenging restart of the industry once borders opened”.

“These reductions coincided with a period of high demand and the imbalance pushed up fares across all airlines. At the same time, fuel prices increased by more than 60 per cent, driving fares higher again.”

In his report, Fels also noted the high rates of cancellations in 2022, which is currently under investigation by the commission. Qantas’ cancellation rate was 2 per cent between 2017-19, while this jumped to 4.4 per cent in 2022-23.

“Qantas’ service delivery returning from the pandemic shut down became so derided the term ‘Joyced’ (a reference to then CEO Alan Joyce) entered into popular Australian usage to ‘describe being severely inconvenienced at an airport by flight cancellations or luggage going astray’,” Fels said.

Fels also aired concern about price gouging in the electricity sector, which he said needs urgent investigation.

(Featured Image: Qantas Airbus A380 – iStock/tupungato)

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