News: Qantas capacity may be cut
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News: Qantas capacity may be cut
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Qantas capacity may be cut
By LEONIE WOOD, SOPHIE DOUEZ and STATHI PAXINOS
Friday 23 November 2001
The Federal Government is believed to be ready to ask Qantas to cut capacity on some key air routes to boost the market share of smaller rivals, Ansett and Virgin Blue.
The radical move follows complaints to the government by Ansett's administrators and Melbourne businessmen Solomon Lew and Lindsay Fox - who bid $1.1 billion for Ansett - that the industry is being stifled by Qantas' 91 per cent stranglehold.
It also coincides with a move by the Australian Competition and Consumer Commission to widen its extensive investigations into alleged anti-competitive behaviour by airlines. Alarmed by a surge in complaints from Qantas rivals, the ACCC is planning guidelines that would define abuses of market power.
But Qantas chief executive Geoff Dixon yesterday blasted any moves to interfere with his business, saying that artificially creating more competition amounted to misguided policy.
Speaking at a business lunch in Brisbane, Mr Dixon said Qantas expected to end up with 65 to 70 per cent of the market once the industry settled down. But he warned that sustainable growth would occur only if it were market-driven, and argued that Australia could support only two intercapital airlines.
Mr Dixon said Qantas was being viewed as "a monster that must be sedated" or like a "magic pudding, that no matter how much you bite out of this company there'll always be something left".
After talks in Canberra yesterday, the Fox-Lew group appears to have won support from the Federal Government for various non-cash assistance in buying Ansett, although it withdrew a request for tax breaks.
The two-hour meeting, which included the heads of the Department of Transport, Ken Matthews, and the Department of Employment, Workplace Relations and Small Business, Dr Peter Shergold, resolved issues such as the transfer of airline operating certificates.
As well, the government has agreed to resolve legislative hurdles that prohibit owners of airlines from owning airports. Mr Fox's companies own Essendon and Avalon airports.
A request for relief in depreciating airline assets is believed to have been held over as the government considers a similar submission from Qantas.
Still, the Fox-Lew group, also known as Tesna, remains concerned that unless Qantas' power is curbed, Ansett Mark II's financial viability is jeopardised.
Deputy Prime Minister and Transport Minister John Anderson said two issues that "go to the heart of the competitive environment" were unresolved and that Fox-Lew "believe very strongly that they have to have an environment in which they're given a fair chance to grow and expand".
"When it comes to competition on the trunk routes, I can only say that you've got people who are very confident that they can make it provide the competition needed. I think that ought to be taken forward, but ... the final issues do have to be resolved by the marketplace."
The last two issues are believed to include some kind of commitment from the government that it would rein in Qantas' dominance and encourage it to cut its market share to a government goal of about 65 per cent.
Mr Anderson noted that while the Trade Practices Act was under review, aviation players wanted "an appropriate environment" in the interim. Talks next week are expected to settle the concerns.
Before the meeting, Mr Anderson indicated he believed the Fox-Lew plan should succeed.
"Let's be frank about this. The creditors looking at this would recognise there's one strong bid in the marketplace that gives them a chance of some return," he said.
"They'd be mad to knock it back, I would have thought."
Meanwhile, Virgin Blue downplayed talk that it would join Lang Corporation to bid for Ansett. Virgin Blue head of commercial activities David Huttner said the airline was still in talks with Lang Corp, but Lang was only one of several possible partners.
Virgin Blue welcomed the ACCC's move to clamp down on anti-competitive practices in the aviation industry.
Qantas is already under investigation by the ACCC for alleged capacity dumping, the strategy of flooding airline routes with extra seats. Virgin Blue has complained of capacity dumping on the Brisbane-Adelaide and Brisbane-Mt Isa routes.
The ACCC's guidelines would be formulated around the future structure of the industry once Ansett is resurrected.
[ 22 November 2001: Message edited by: Wirraway ]
Qantas capacity may be cut
By LEONIE WOOD, SOPHIE DOUEZ and STATHI PAXINOS
Friday 23 November 2001
The Federal Government is believed to be ready to ask Qantas to cut capacity on some key air routes to boost the market share of smaller rivals, Ansett and Virgin Blue.
The radical move follows complaints to the government by Ansett's administrators and Melbourne businessmen Solomon Lew and Lindsay Fox - who bid $1.1 billion for Ansett - that the industry is being stifled by Qantas' 91 per cent stranglehold.
It also coincides with a move by the Australian Competition and Consumer Commission to widen its extensive investigations into alleged anti-competitive behaviour by airlines. Alarmed by a surge in complaints from Qantas rivals, the ACCC is planning guidelines that would define abuses of market power.
But Qantas chief executive Geoff Dixon yesterday blasted any moves to interfere with his business, saying that artificially creating more competition amounted to misguided policy.
Speaking at a business lunch in Brisbane, Mr Dixon said Qantas expected to end up with 65 to 70 per cent of the market once the industry settled down. But he warned that sustainable growth would occur only if it were market-driven, and argued that Australia could support only two intercapital airlines.
Mr Dixon said Qantas was being viewed as "a monster that must be sedated" or like a "magic pudding, that no matter how much you bite out of this company there'll always be something left".
After talks in Canberra yesterday, the Fox-Lew group appears to have won support from the Federal Government for various non-cash assistance in buying Ansett, although it withdrew a request for tax breaks.
The two-hour meeting, which included the heads of the Department of Transport, Ken Matthews, and the Department of Employment, Workplace Relations and Small Business, Dr Peter Shergold, resolved issues such as the transfer of airline operating certificates.
As well, the government has agreed to resolve legislative hurdles that prohibit owners of airlines from owning airports. Mr Fox's companies own Essendon and Avalon airports.
A request for relief in depreciating airline assets is believed to have been held over as the government considers a similar submission from Qantas.
Still, the Fox-Lew group, also known as Tesna, remains concerned that unless Qantas' power is curbed, Ansett Mark II's financial viability is jeopardised.
Deputy Prime Minister and Transport Minister John Anderson said two issues that "go to the heart of the competitive environment" were unresolved and that Fox-Lew "believe very strongly that they have to have an environment in which they're given a fair chance to grow and expand".
"When it comes to competition on the trunk routes, I can only say that you've got people who are very confident that they can make it provide the competition needed. I think that ought to be taken forward, but ... the final issues do have to be resolved by the marketplace."
The last two issues are believed to include some kind of commitment from the government that it would rein in Qantas' dominance and encourage it to cut its market share to a government goal of about 65 per cent.
Mr Anderson noted that while the Trade Practices Act was under review, aviation players wanted "an appropriate environment" in the interim. Talks next week are expected to settle the concerns.
Before the meeting, Mr Anderson indicated he believed the Fox-Lew plan should succeed.
"Let's be frank about this. The creditors looking at this would recognise there's one strong bid in the marketplace that gives them a chance of some return," he said.
"They'd be mad to knock it back, I would have thought."
Meanwhile, Virgin Blue downplayed talk that it would join Lang Corporation to bid for Ansett. Virgin Blue head of commercial activities David Huttner said the airline was still in talks with Lang Corp, but Lang was only one of several possible partners.
Virgin Blue welcomed the ACCC's move to clamp down on anti-competitive practices in the aviation industry.
Qantas is already under investigation by the ACCC for alleged capacity dumping, the strategy of flooding airline routes with extra seats. Virgin Blue has complained of capacity dumping on the Brisbane-Adelaide and Brisbane-Mt Isa routes.
The ACCC's guidelines would be formulated around the future structure of the industry once Ansett is resurrected.
[ 22 November 2001: Message edited by: Wirraway ]
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Whatever happened to "survival of the fittest" or "free enterprise"?
I cannot believe that the Federal Government has any right dictating how much market share a privately owned business is or is not allowed to have in this country!
If a competitor can't stand on their own two feet then don't compete!
Artificially engineering competition is not healthy for anyone and the Government should butt out!!!
I cannot believe that the Federal Government has any right dictating how much market share a privately owned business is or is not allowed to have in this country!
If a competitor can't stand on their own two feet then don't compete!
Artificially engineering competition is not healthy for anyone and the Government should butt out!!!
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So what happens next - do Coles and Safeway also get told to close a few stores so that the local IGA supermarket can get a foot in? I sort of understand what they want to achieve but think that the approach will become very dicey...
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How do you think Qantas have gotten so dominant? If you take out of the equation the role played by the total lack of business acumen in those under-achievers to our east ( not talking about their cricketers today but it's still appropriate!) the playing field has not been level since the day QF was privatised. The taxpayer payed off hundreds of millions of dollars of their debt, they were virtually given a domestic operation and Ansett was forced to compete internationally with one hand tied behind its back. Not to mention some very lucrative government contracts that Ansett had serviced well on a commercial basis were just taken away and handed to Qantas, most notably the defence contract. Just like the Howard government with their recent win, Qantas can afford to give a little. Assuming Ansett and Virgin Blue survive at all, they will never now be in a position to realistically threaten QF's dominance.
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Competition is healthy, and it is in most peoples interest that the government do intervene to increase domestic competition. Certainly the travelling public benefit through lower fares and generally improved efficiency if the QF monopoly is partially broken down. And that is the real issue here - the ACCC and government need to consider the interests of the majority, not the minority. Also, pilots not employed by a major airline, but seeking to gain employment should welcome this move because there will inevitably be more jobs available with increased competition due to removal of some monopoly inefficiencies.
The group that should be concerned are the QF shareholders who are facing decreased returns, along with the management and staff that could face paycuts, or more likely for the staff - redundancies.
The group that should be concerned are the QF shareholders who are facing decreased returns, along with the management and staff that could face paycuts, or more likely for the staff - redundancies.
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There is absolutely nothing wrong with the governments proposal...........if you are a fan of communism. I suppose they will do the same with oil companies and banks, two things that have alot mor effect on the average Aussie than airfares. 
