Labor, stop sweating the small stuff and use Rex to smash Qantas

Labor’s proposed $900 million “national productivity fund” to encourage states to boost competition is another in an increasingly long list of reforms that mean the Albanese government, whatever its other failings, has done more on competition in one term than the Coalition — traditionally the party of corporations, not competition — managed in three.

This includes major, though underwhelming, changes to merger laws, a competition taskforce within Treasury, Andrew Leigh’s work on non-compete clauses, giving the ACCC more power, and, now, a revisit of the national competition policy agenda of the Keating years that was, in a more structural way, one of the most nation-altering reforms of that era.

All of that is positive, though Anthony Albanese’s inexplicable hostility to divestiture powers, when even the Coalition has embraced them on supermarkets (and — depending which Bridget McKenzie media conference you’re at — airlines), remains bizarre.

But none of it is going to matter a jot to voters at the next election, few of whom have any idea about competition reforms and even fewer of whom get the connection between greater competition and lower prices, and why large corporations will do virtually anything to reduce competition.

To convey a sense of that connection to voters, and to send a signal that it’s prepared to do something serious about inflation, Labor needs a big, bold measure that will capture the attention even of the disengaged. Luckily it has one right in front of it.

Back in July, we suggested the travails of Rex Airlines were a perfect opportunity for the federal government to re-enter the aviation market in a way that would inject competition and terrify the lazy incumbents Qantas and Virgin. The government should take a large equity stake in Rex and put it back into metropolitan routes.

Since then, the case for a government re-entry into domestic aviation has only grown stronger. Yesterday the ACCC reported that “since Rex suspended operations on its services between metropolitan cities on July 31, 2024, the average airfare on all major city routes has increased by 13.3% to September 2024”.

“The domestic airline industry has become even further concentrated, and it may be some time before a new airline emerges to compete on popular services between metropolitan cities, with normal barriers to entry and growth exacerbated by aircraft fleet supply chain issues and pilot and engineer shortages,” competition commissioner Anna Brakey said.

What was Qantas’ response to this damning illustration of how it gouges customers in the absence of competition? It couldn’t explain why airfares rose across all city routes. But according to one Qantas executive, “The day selected in the latest report was 31 October, which is when Melbourne was hosting Coldplay. As such, demand was significantly higher on flights into Melbourne…”

Fucking Coldplay!

That is up there with Alan Joyce blaming passengers not being “matchfit” for his airline’s massive delays, and when Qantas tried to explain away its “ghost flights” scandal by saying it didn’t want to worry people who’d bought a ticket by telling them their flight was cancelled.

Coincidentally, the government announced yesterday it “will provide financing of up to $80 million to keep Rex’s regional routes running during an extension of the voluntary administration process, as well as granting early access to entitlements for former employees of the business”. Other regional airlines are unhappy with the government for not giving them that money to take over Rex’s routes. But the bigger question is why the government isn’t considering giving Rex enough capital to restore and continue its metro routes in exchange for 51% of the airline and the board spots that go with it.

As the ACCC says, we’ll be waiting a long while for anyone else to take the risk of investing in Australia’s third airline. But there’s one ready to go (back) to providing real competition for Qantas. And with government backing of Rex, Qantas will know it can’t just resort to its usual anti-competitive tricks — below-cost pricing, slot hoarding — to drive a rival with shallower pockets out of business, as it did with Rex.

It would be a strong signal to not only the gougers of Qantas but also voters that Labor takes competition and inflation seriously.

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