It seems like everyone is talking about high airfares, flight delays and low service standards by airlines. Even the Australian Government, which has called for a policy review for the aviation sector.
It’s been 10 years since the Australian Government last issued a policy on the aviation sector: an Aviation White Paper. A policy review is underway, with the issue of the Aviation Green Paper (towards 2050) on 7 September 2023. It contains an analysis of the aviation sector, various proposals, and requests for feedback from the public. It will be followed by the Aviation White Paper to be issued in 2024.
This article consists of extracts from Chapter 3 of the Aviation Green Paper.
Competition
Key issues
- Australia’s airline sector is highly concentrated, with Australia’s small population relative to its large size making an airline industry that can support more than two major players difficult to sustain.
- Competitive dynamics vary across international domestic and regional sectors, with different outcomes for consumers as a result.
- Strong competition can be expected to produce better outcomes for consumers.
Facts
In the Australian domestic aviation market, the Qantas Group and Virgin Australia control 95 per cent as of January 2023. It is one of the most concentrated sectors in Australia. This is in part a reflection of Australia’s geography and population, While the United States, a similarly vast landmass, supports more domestic carriers, its population is ten times that of Australia.
Challenges to increasing competition exist in both airline and airport segments, in part due to barriers to entry arising from high capital costs, network effects and regulatory requirements.
Australia’s aviation market is experiencing structural change post-COVID. Virgin Australia is pursuing a revised business model, the low-cost airline Bonza has launched services connecting regional hubs to holiday destinations and Regional Express (REX) has expanded beyond its regional footprint, bringing increased competition to capital city routes.
The competitive dynamic varies considerably between routes, with some key routes, especially in the regions, having been unable to support genuine competition.
The competitive dynamic has not yet returned airfares down to pre-COVID levels, and will not until pre-COVID levels of capacity are brought back into operation.
The Australian Competition & Consumer Commission (“ACCC”) is active in investigating allegations of anti-competitive behaviour and in denying authorisations for acquisitions and joint arrangements. It opposed Qantas’s proposal to acquire Alliance Airlines and denied an application for authorisation by Virgin Australia and Alliance Airlines to co-ordinate and jointly tender for contracts.
Some propose that cabotage, which is the carriage of passengers in domestic routes by foreign airlines, be liberalised beyond short-term arrangements when the Australian industry is unable or unwilling to provide a service. The Australian Government is not in favour of liberalising cabotage because it would mean that Australia would primarily be relying on foreign regulators for safety oversight, and it might undermine the fair work framework because foreign airlines would import lower wages and conditions.
Possibilities and proposals
The ACCC has requested its airline monitoring be restarted to assist in investigating anti-competitive behaviour. The final Airline competition in Australia monitoring report was issued in June 2023.
The Productivity Commission could undertake a public inquiry into airfares on routes to and between regional centres in Australia. The inquiry could investigate increasing operational subsidies and introducing other price control alternatives.
The Australian Government proposes to publish, in consultation with industry, a decision-making framework and guide for short term cabotage dispensations to provide clarity on existing arrangements and provide an administrative framework to manage any future decision to implement a longer-term arrangement.
Consumer protection
Key issues
- Consumer complaints in Australia suggest competition is not delivering the outcomes consumers expect.
- Key consumer complaints include flight cancellations, delays and the terms and conditions for refunds and flight credits when these occur.
- This framework needs to consider different international ticketing arrangements.
Facts
The COVID-19 pandemic resulted in widespread flight cancellations, primarily due to health and travel restrictions. Following the pandemic, flight delays and cancellations remain well above long-term trends. This has contributed to a sharp rise in consumer complaints about airlines. Stakeholders have also raised concerns about the terms and conditions for refunds and flight credits for flights cancelled during the COVID-19 pandemic.
Australia has no aviation-specific consumer protection laws. The terms and conditions of carriage which apply to an airline are governed by the Australian Consumer Law (ACL). The ACL contains Consumer Guarantees that services will be rendered with due care and skill and that services will be suppled within a reasonable time. There must no unfair contract terms. The ACL is administered primarily by the ACCC, with State Fair Trading Offices also empowered.
In July 2023, on time arrivals were significantly lower than the long-term average (68.2 per cent versus 81.3 per cent) and on time departures were also significantly lower (68.1 per cent versus 82.5 per cent). Cancellations are significantly higher than the long-term average (4 per cent versus 2.1 per cent).
The ACCC does not generally resolve individual consumer complaints about delayed or cancelled flights. It focusses its compliance activities on issues that can result in widespread harm.
Since 2012, the Australian Consumer Advocate (ACA), has handled consumer complaints involving the participant airlines (who fund it), namely Qantas, Jetstar, Regional Express and Virgin Australia. It can only hear complaints, and cannot issue binding decisions against the airlines, such as to pay compensation. It passes on its recommendations for complaint resolution to the airline to implement.
This means the ACA is not a substitute for a low-cost, accessible legal process which can ensure passengers can access fair treatment. Nor does it cover international aiirlines.
Proposals and requests for views
The Australian Government proposes to act to improve complaint handling processes and strengthen consumer protections in the airline sector. The Australian Government is interested in stakeholder views on options to improve the effectiveness of consumer protection arrangements.
The Australian Government is seeking views on revising the governance arrangements for the Airline Customer Advocate, including expanding its remit to educate customers on their legal entitlements, and working with industry to introduce ‘fixed payout’ type insurance products which provide more certain compensation arrangements.
The Australian Government is also seeking to understand whether options pursued in other jurisdictions – such as a Customer Rights Charter or a stronger ombudsman model – would deliver benefits to Australia’s aviation sector.
Disability access
Key issues
- People with disability continue to face barriers to accessing travel.
- The Royal Commission into Violence, Abuse, Neglect and Exploitation of People with Disability (Disability Royal Commission) heard that people living with disability have negative experiences when travelling by air.
- Air travel has unique safety and security requirements that pose challenges to accessibility.
- Some barriers to accessible air travel are not addressed by current legislation, and the internal procedural policies of airports and airlines can restrict access to air travel for people with disability.
Facts
Air travel is a heavily regulated form of transport, with specific safety and security requirements that can create additional challenges for passengers living with disabilities.
Whilst the Transport Standards articulate specific responsibilities to remove discrimination from aviation services, people living with disability continue to encounter barriers when traveling by air.
Stakeholders have also reported concerns relating to compensation for damage to mobility aids, airport security screening, carriage of lithium-ion mobility aid batteries and recognition of assistance animals, which are outside the scope of the Transport Standards.
People living with disability may also be impacted by poorly delineated operational responsibilities between airports and airlines, particularly at interfaces where support is required. For example, where mobility aid users require assistance to transfer from set down zones to inside the airport terminal, neither airport nor airline staff assist passengers. Where it is unclear who is responsible for providing assistance, passengers living with disability may not receive support to undertake a journey.
Expectations and request for views
The Australian Government expects the aviation sector to make substantial additional and ongoing investments to make services accessible and legally compliant with human rights obligations, including in relation to staff training, carriage of assistance animals and mobility aids, standardisation of processes for carrying lithium-ion wheelchair batteries on aircraft, complaints processes and provision of more accessible formats of communication and information dissemination.
Airline and airport operators should develop a common user experience from ‘kerb to aircraft’ by identifying where responsibility lies for assistance of passengers across the whole journey, and the types of assistance for passengers available. This includes the security screening process, noting that the current Aviation Screening Notice includes provisions for screening of people with special circumstances to remove barriers in security screening where possible.
The Australian Government seeks views on further improvements that can be made to the Transport Standards to accommodate air travel’s unique requirements, improvements beyond the Transport Standards to improve aviation accessibility, specific challenges of people living with disability when travelling by air in regional and remote areas and how the Disability Access Facilitation Plans put in place by airlines and airports can be improved.
Comments are invited
The Australian Government invites comments on the Green Paper to be considered in the development of the White Paper, in particular in response to the questions posed. Views are sought by Thursday 30 November 2023.