A level playing field !

Alan Joyce, CEO of Qantas has called on it's employees to lobby the Federal government to stop rival Virgin from injecting a fresh three hundred million dollars of new capital by way of it's foreign capital plans. At present, airlines competing on the Australian domestic airline market are restricted to 49% foreign ownership.   The Virgin proposal would raise this to 72%.

Qantas is owned by it's shareholders and is a listed public company on the Australian stock exchange.  Virgin is part owned by Air New Zealand, Middle Eastern airline Etihad and Asian carrier - Singapore Airlines.  Qantas domestic traffic carries 48.3 million passengers annually, compared to the Virgin share of 19.3 million.

Where Qantas sees this new capital injection harming it's position is a coming tussle between Australia's 93 year old national carrier and foreign airlines in which the country of origin is either the partial or total owner - and therefore profitability is not the main criteria.    Some of these airlines are a source of national pride and state treasuries are quite happy if they run at a loss.

There seems a similarity between past controversy on the tactics used by Coles and Woolworths in dispatching competitors.    Small independent butchers, greengrocers and similar shops were subjected to a campaign of the duopoly selling below cost to force them out of business.   Once they closed their doors, prices returned to normal levels.   The duopoly ceased this practice under threat of disciplinary legislation.

If foreign owned airlines are allowed to gain control of Virgin, Qantas fears that similar tactics would be used to lower the Qantas seat share and drive them out of the airline business.  An " for profit " airline would be vulnerable to an attack by a competitor who was funded from rich state treasuries - and prepared to use price as a weapon.

Australian domestic airline seat prices are inducing more people to fly and the tourist trade is gaining great benefit from this bonanza.   Few would want to return to the bad old days of several decades ago.  At that time, Qantas was restricted to overseas flights and did not carry domestic passengers.  Domestic routes were serviced by two competitors - Ansett, which was a " for profit " company, and TAA - a wholly owned government entity.

These two carriers scheduled their services in tandem - and at times that suited the airlines rather than the passengers.   Their planes followed each other down the taxiway before takeoff - and they arrived at their destination like co-joined twins.    That same tandem also related to seat prices - and they were uniformly high by today's standards.   These shackles have been cut loose by deregulation - and competition.

The government regulator will need to move carefully in adjudicating this ownership proposal.   We certainly need healthy competition to keep our domestic fares competitive, but it would be easy to replace short term gain - with long term pain !    It is essential that those providing air services in Australia do so on a level playing field.

Qantas is one of this country's biggest employers of labour and the government will need to be sensitive  to the job risks that are involved.    The domestic air industry is heavily licensed which gives the government a much higher degree of control than in most other industry sectors.

Whatever decisions apply, they will need to be carefully and thoroughly thought through if we are not to see imbalances in this vital industry.