By Nick Lucchinelli
SYDNEY, Oct 30 AAP - Aviation's current sweet spot may be short-lived, particularly in the domestic market, says the Australian businessman who ran three international airlines, Sir Rod Eddington.
A Rhodes Scholar and business adviser to Labor leader Kevin Rudd, Sir Rod led Cathay Pacific, Ansett and British Airways at various times over the past two decades.
Sir Rod said aviation had been "cash flow negative since the Wright brothers".
"The industry is economically dysfunctional," he told an Australian British Chamber of Commerce luncheon today.
While capacity constraints had led to a temporary hike in profits, that would be tested soon when more planes and new airlines entered the market.
"In some ways, the domestic (Australian) market is one of the few truly rational markets in the world because it's not subsidised," Sir Rod said.
"History has said this market will support two airlines."
It was already supporting "two and a half", with the success of the Qantas-owned budget offshoot Jetstar.
Although "the vast majority of airlines that start fail" in the Australian market, the looming entry of the Singapore Airlines-backed Tiger Air would be interesting because it was well resourced and managed.
"It will be interesting if Tiger steps up to 20 planes," Sir Rod mused.
In addition to the new seats Tiger will introduce to the domestic market with its five planes next month, Qantas has orders for 12 new Bombardier Q400s turboprop aircraft for its regional Qantaslink network.
Similarly, Virgin Blue has orders for 20 Embraer jets to use domestically.
There will also be more international seats available, with Air Asia X promising $99 flights between the Gold Coast and Kuala Lumpur, and Qantas taking delivery of 65 Boeing 787 Dreamliners to support the long-haul international plans of Jetstar.
And Virgin Blue's V Australia brand will fly to the US from next year.
Sir Rod said the entire global industry generated only about $5 billion profit because of intense competition and government ownership and subidisation of airlines.
He said airlines were not a particularly good investment and the challenges would increase as global warming, infrastructure shortfalls and a shortage of pilots and engineers took their toll.
"For every Richard Branson ... there are hundreds who have failed," Sir Rodd said.
AAP nrl/jmc