Nationals Leader Backtracks on Airline Break-up Proposal
Nationals Leader David Littleproud has distanced himself from his colleague's proposal to use the threat of break-up powers against Qantas and Jetstar. Shadow Transport Minister Bridget McKenzie had suggested the government could introduce aviation break-up powers to improve the behaviour of the Qantas and Virgin duopoly. However, Littleproud stated that it was too early to pursue such measures, emphasizing a need for a calm and methodical approach to competition policy in the airline industry.
The Coalition has already adopted a Nationals proposal for similar divestiture powers in the groceries sector, arguing that the oversized market share of Coles and Woolworths has distorted competition. Senator McKenzie suggested the same powers could be introduced for the airlines, adding that while the Coalition did not want to force a sell-off, the threat alone could be effective.
Littleproud, however, clarified that the Coalition was seeking to have the issue considered by Treasury before taking any further steps. Transport Minister Catherine King dismissed the proposal as a "thought bubble" and highlighted the government's recent white paper on aviation, which recommended an ombudsman authority to improve customer service and addressed slot allocation at Sydney Airport.
A Treasury review of competition between airlines found that greater competition would reduce price growth and that adding a second competitor to a route could reduce airfares by a quarter. The review also found that Qantas would respond differently depending on whether Jetstar or a competitor entered a route, suggesting that Jetstar's presence allows Qantas to exercise a greater degree of price discrimination.
Senator McKenzie argued that the Treasury's review identified competition as a problem and that, in the absence of a plan to improve competition, Treasurer Jim Chalmers should consider break-up powers for the airlines. She emphasized the need to address the concentration of market power in the aviation sector, stating that 92% of the sector is controlled by two players.
Shadow Finance Minister Jane Hume echoed these concerns, calling for the government to include aviation in the Treasury's competition review. She also advocated for the Australian Competition and Consumer Commission to have more powers to understand and address collusion in the industry.
Assistant Minister Matt Thistlethwaite dismissed the idea of divestiture, questioning who would buy Jetstar if it were divested from Qantas. Former ACCC chair Allan Fels, however, argued that divestiture powers would have a permanent deterrent effect on firms from breaking the law. He believes that such powers should be considered under Australian law, with a due process requirement, to deter anti-competitive behavior.