Qantas is protecting monopoly

QANTAS has hit back aggressively at Townsville Airport and Mayor Jenny Hill over its refusal to back the airport upgrade.

Having just booked its second biggest profit in history, bankrolled by surging profits from its domestic operations, the national carrier has threatened to cut services ( read flights) to Townsville in retaliation to our city having the temerity to ask it to pay its way. Qantas is within its rights to refuse to pass on the passenger charge but a few facts should be injected into its rhetoric.

Firstly, the idea that using a passenger charge to fund the upgrade is unique or even unusual is simply untrue. The proposed upgrade model adheres to the best practice guidelines prescribed by the industry’s global representative body, the International Air Transport Authority. This is the body that goes into bat for airlines. It has 275 members across the globe including, you guessed it, Qantas. IATA states that a per- passenger charge is the desired option, whereby airlines collect the charge on behalf of the passenger and remit it back to the airport.

The airport is required to provide the airline with transparency on all financial inputs, such as operational expenses, capital expenditure and passenger numbers. This is precisely what Townsville Airport has done. It has spelt out in detail how the $ 80 million would be spent. Moreover, it has outlined the strategic imperative for the upgrade – it is already over capacity and is tracking for continued growth.

It is standard industry practice for airports to be upgraded every seven to 10 years. Townsville has not been upgraded for 15 years. The blame for that tardiness should be sheeted back to its owner, Queensland Airports Limited, which in that time has dramatically upgraded its main asset, Gold Coast Airport. But now that it is proposing an upgrade, it is incumbent on the airlines to carefully consider the merits of the expansion and, if they accept they are not unreasonable, support them.

Qantas is arguing the proposed upgrade is unnecessary gold plating. Of the $ 80 million upgrade, it is offering to support funding for less than $ 10 million – and that for essential improvements to the runway apron.

The does not accept Qantas’s claim. Nor do we accept Qantas’s additional argument that passengers would not accept a $ 3 price rise.

If that’s the case, then why has Qantas been effectively increasing prices by far more than that this year? They have done so by reducing the size of aircraft for many Townsville flights from 737s to 717s and even, on occasion, Dash 8s. The effect of this is to reduce the number of cheaper seats available, which in turn inflates Qantas’s profit margin.

In essence, Qantas is using its market dominance to bully a smaller, price taking airport corporation.

Qantas has Townsville’s sole airline lounge and it is anxious to maintain that monopoly to safeguard its hold on its more profitable business passenger clientele.

Nobody can begrudge its strategic logic – business is business.

But it is disingenuous of Qantas to claim it is objecting to the upgrade on the grounds it is unnecessary or that the $ 3 charge would drive customers away.

It is simply playing hardball because it suits its business interests to keep the airport small and prevent other airlines getting any sort of competitive footing.