Dr John Hewson has gone one step further today calling for any international airline to fly domestically anywhere in Australia.
Not really a balanced playing field if you look at the cost involved with running a foreign airline vs an Australian one. How does an Australian airline compete with a ME carrier who doesn't pay tax? Or with Singapore with low taxes and favourable depreciation scheduling?
Not to mention the regulatory costs involved for an Australian Airline with CASA vs what foreign airlines go through?
Domestic air travel: an opportunity that is just flying past us | afr.com
The Harper review of competition law and regulation has given the Abbott government another chance to reboot its drive for higher productivity and economic efficiency across Australia – something now becoming a vital national priority. Harper lays out a series of reforms that at no fiscal cost can drive incomes and jobs in these dying days of the mining investment boom. Done quickly, many of the benefits from reform can even start flowing in time for the election.
Take Harper's recommendation to cut the red tape that stops foreign airlines from carrying passengers and cargo domestically. Even though our large and sparsely populated economy suffers under the tyranny of distance, we ban competition that could help set it free. We risk missing out on benefiting from the boom in Asian air travel as their incomes rise and costs plummet. By the end of this decade forecasts suggest we might be receiving 9 million tourists a year, but that is out of nearly 700 million visitors to the entire Asia Pacific region.
The ban means foreign airlines must travel with empty seats and cargo holds between Australian cities – or not fly at all. This capacity could be offered very cheaply, particularly on routes where most flight costs are covered by international passengers.
The ban hurts regional areas more than major cities, since they already face limited competition, resulting in poor service at high cost. A recent Productivity Commission report found that most international visitors don't leave major cities. Indeed, the numbers going to tropical Queensland fell 20 per cent between 2006 and 2014. A recent parliamentary committee recommended allowing foreign planes that fly overhead between Perth and Singapore to stop at Christmas Island for business. Similar arguments apply to northern airports, where major foreign airlines would be much more likely to drop by on their southern routes if they were allowed to do domestic trade.
Some market participants argue that the demand is not there, particularly since many tourists don't want the inconvenience of international security and customs on a domestic trip. But then, you don't need the ban: just let the market decide.
Nor can safety or security justify the ban. These planes already fly to our major cities. Few Australians would be concerned about getting on a cheap Singapore Airlines flight from Melbourne to Sydney. Most outrageously, foreign airlines are already allowed to transport their own passengers domestically following a stopover. So while someone on an international ticket can spend time in Perth and get a cheap ticket to Melbourne, a domestic tourist can't. Similarly, Hong Kong restaurants benefit from cheap Cairns seafood that Brisbane restaurants can't, because there is a ban on the foreign airline unloading on the domestic stopover.
The ban can be relaxed, such as when Ansett collapsed, suggesting reform could be done without risking the Senate.
Things will eventually change. Europe deregulated in the late 1990s, leading to a boom in low-cost air travel and tourism. Our ASEAN neighbours are looking at doing the same. It's just a question of when, not if, we too will change. With Qantas back to profitability, the current regulatory framework increasingly looks like a farce. And just like comedy, timing is the secret of good government.
John Hewson, an economist, was federal leader of the Liberal Party of Australia from 1990 to 1994.