Today's Canberra Times editorial hits the nail on the head:
"IT IS CERTAINLY not in the interests of the people of Canberra to have a single airline in a virtual monopoly of the most important air route to Sydney, but those who want to compete with it must rely on more than pressure on government to improve their competitive position. They must in fact compete - and not only on price, but on service, convenience, flexibility, and probably connections. Given the present Qantas stranglehold, effective since the demise of Ansett, and its particular capacity to satisfy many of those needs, competitors must probably, in fact, do more than match its service, whether to particular classes of passengers, such as public servants, or to the public at large.
Virgin Airlines has announced its intention of dropping out of the route. It blames government, or, more precisely, the apparent failure of public servants to follow government directives about seeking the best fare of the day. Another, Regional Express, says it is reviewing its service, which it has described as not being, at this stage, financially viable. Both are highly competitive with Qantas for fares, but say that they are getting only a tiny share of the bookings by bureaucrats and politicians. Public servants seem instead to overwhelmingly prefer Qantas. Virgin says it is getting only "a low single-digit" percentage of public-service business. The Department of Finance and Administration says that 14 per cent of public service travel is on airlines other than Qantas. Exact figures are in dispute, though an independent study under way may resolve the issue.
About 860,000 people fly between Canberra and Sydney each year. About 150,000 of these trips are made by public servants for their jobs. Their custom is very important, a fair share of it indeed being critical to any airline seeking to survive. That an overwhelming proportion of it goes to Qantas is not that surprising, certainly not depending upon any conspiracy theory such as the fact that a Qantas-associated company has successfully tendered the management of the Public Service's business. The fact is that whatever the Government directive, those who are arranging their travel will seek arrangements that they think will best meet their needs, and represent, overall, the best bargain for the Commonwealth's resources. A few dollars more or less on a straight air fare may mean little, in their judgment, compared with flight times that are convenient and an efficient use of resources, the total time involved in moving from office in Canberra to office in Sydney, or to make further connections, or, if need be, to change arrangements and have the flexibility of returning earlier or later.
For many public servants it is important to be able to leave Canberra early in the day and get the last flight back. Virgin seemed competitive with this; indeed had only a single flight out early in the morning and a late flight back. But some may well have thought that tying themselves to this schedule gave them little opportunity to get home earlier if circumstances permitted, or to rearrange travel if it was necessary. Indeed, they could argue that their employer would be losing money and efficiency for the sake of a few dollars if their complete travel arrangements were predicated only upon the cheapest fare for the air sector.
The problem that this presents, alas, is that it becomes very difficult for a substantial competitor to emerge unless they have massive resources, lots of capacity, and, probably, the time and the bank balances to be able to invest in building up a market. Moreover, the operation of a free market may well tend naturally toward monopoly - the prospect of which led for years to the old two-airline policies, with the limited effective competition which that offered. Since that policy collapsed, and since Ansett collapsed, there have been waves of fresh competitors in the market place, and, when they were there, heavy competition on fares and services. But there have not been so many survivors. And some, Virgin in particular, are not as pure as they claim, in the sense that they cherry-pick routes they expect will be highly profitable, but sometimes fall short on connections, or connection convenience. They have, of course, every right to demand a fair marketplace to sell their wares, if not always quite the right to insist that they are always selling the same products. It is difficult to see what further directives they can squeeze from politicians without some suggestion that they are being propped up.
Equally, however, Canberra citizens, including public servants travelling at public expense, can be reasonably sure that prices will rise unless Qantas has a substantial competitor. Fare competition does not occur from the kindness of Qantas' heart. The passenger volumes in and out of Canberra, and the relative certainties of types of business (and business-class) travel, are such that Canberra ought to be a profitable route for any investor willing to make a serious commitment to it. Virgin's single flight in, and single flight out a day hardly suggested such a commitment.