Australians will lose if Qantas wins against the ACCC

A win for the airline would only serve to reset the bar for air travel even lower, with dreadful ramifications for productivity.
Ayesha de KretserSenior reporterNov 5, 2023 – 5.30pm

A Qantas customer booked flights from Sydney to Tamworth to attend a Nick Cave concert. On the morning of the event, Qantas cancelled a flight due to arrive at 1.30pm and rescheduled her onto a new one, arriving at 9.30pm.
Left with the choice of missing the show or accepting a flight credit, she opted for the latter and suffered the loss on the $289 show.

Qantas chairman Richard Goyder and CEO Vanessa Hudson at the company’s AGM in Melbourne on Friday. Joe Armao When the customer tried to apply the credit for flights from Sydney to Cairns, she couldn’t book the cheapest “red e-deal” seats available online, even though that was the equivalent fare she booked to Tamworth.
A call to Qantas revealed her original booking class (an alphabetical letter that categorises the ticket within a fare category) was different, so she would need to stump up $200 extra per seat.
Having in effect burnt $449 on flights and concert tickets, on top of the original $945 reissued as credit, she joins the disenchanted Qantas customers who are watching the ACCC’s case eagerly.
Will the Federal Court agree with Qantas, that when we book a trip we’re simply buying a “bundle of rights” or a vague promise to get somewhere, sometime?
The customer’s experience shows ordinary travellers don’t realise they’re buying variable booking classes within a fare. But for airlines, the booking class is crucial to revenue management and undermines the legal argument Qantas is relying on.
“The industry sells a time-definite product, rather than a time-indefinite product, so I don’t see the point regarding the obligation to simply transport you from A to B within a reasonable timeframe as fully accurate,” says Air Control Tower managing director Neil Glynn, an industry analyst.
“Once the 9am flight departs, all unsold inventory expires, but the cost of the flight doesn’t change significantly whether there were 100 or 150 passengers on it, so the time-definite nature of the product is a cornerstone of revenue management strategies.”
And even if customers more broadly were to accept – as Qantas is at pains to argue – that there are no guarantees around timeliness, they expect their rights as consumers will kick in when there are inevitable delays. (What constitutes an “inevitable” delay is still up for debate in Australia.)
The ACCC has been pressing Transport Minister Catherine King to use her white paper to embed similar regulations as those in Europe, where passengers are compensated for delays. By taking on the ACCC in arguing passengers have no right to expect their flight to take off on time, Qantas is goading an already motivated regulator to make further, far more costly changes.
“In Europe, EU261 stipulates that passengers have the right to claim compensation should a flight be delayed three hours or more (unless due to exceptional circumstances), which is legal context for the time-definite point in Europe,” Glynn explains.
If the worst case is realised and compensation is legislated, Qantas admits it will just pass the cost of compensation onto customers in the form of higher airfares. This again undermines chief executive Vanessa Hudson’s lofty promise to “restore the balance” for customers.
Qantas says the ACCC’s case unfairly paints the airline as the villain, and it would have been surprised by the fact that all domestic customers with a cancelled flight got put on another within an hour of their booking. Further, 98 per cent of international travellers were rebooked (or offered flights) within 24 hours of their original booking, on average, two months out from their departure.
With plenty of time to shuffle, Qantas contends that no harm was done.
The airline’s defence flails when it comes to continuing to sell the flights – for an average of 16 days – after they had been cancelled.
Virgin Australia, like Qantas, does not guarantee your flight will take off or arrive on time. But unlike Qantas, Virgin says it has to have a “reasonable basis” to believe it can operate the flights it puts up for sale to comply with section 36 of Australian consumer law.
Qantas does not say anything about having a reasonable basis for the flight being marketed, only that it will get you there within a reasonable time. (Of course, if a passenger doesn’t show up on time, the “bundle of rights” idea quickly loses currency.)
And while Qantas is adamant it did not do any of this for commercial benefit, it undoubtedly raised and held on to revenue by choosing not to follow the lead of other airlines that simply refunded customers’ money.
Qantas argues it was doing its customers a favour by going out of its way to find them new flights, while saving the already stressed call centres from being inundated.
This ignores the fact Qantas customers may have chosen to rebook their flights on a different airline, like the concertgoer might have done if she’d been given a refund.
Inconvenience to the consumer or lost revenue for airlines make up only one part of what is riding on the ACCC’s case.
If the court rules Qantas is selling a bundle of rights to get where we want to go, but not on time, what will it cost the Australian economy? Will travellers withhold spending if there is no obligation from a service provider to get them there?
The productivity challenges wrapped up in the inefficient operations of Sydney Airport are front and centre in former Productivity Commission boss Peter Harris’s slot review. The ACCC contends that at least in part, Qantas kept the flights on sale to maintain those slots. Qantas refutes the claim because there were pandemic-era waivers in place during the time in question.
An unreliable and monopolised network has the effect of deterring travel – whether from regional Australia, where the cost becomes prohibitive, or from inbound tourists who Qantas has in effect prevented from spending money here by lobbying for protection from competition.
Qantas has been steadily resetting the bar lower when it comes to its on-time performance, cancellations (still 50 per cent higher than pre-pandemic levels), and the quality of food and cleanliness on board.
But a ruling that consumers don’t have a right to get where they want to go on time would have a ripple effect on traveller behaviour.
Some business travel will cease. Even leisure travellers, who until now have been both cashed up by pandemic-era stimulus and desperate to make up for lost holidays, will think twice about their next trip, more so if the economy enters a sharper slowdown.
Teal independent Monique Ryan has taken up the ACCC’s case and is also pressuring the government to institute a European-style compensation system, while Senator David Pocock has successfully lobbied to reinstate the ACCC’s airline monitoring.