Transcript - ABC Radio National - Breakfast with Patricia Karvelas

PATRICIA KARVELAS [HOST]: You may have heard the term slot hoarding. It’s when dominant airlines hold onto excess time windows at airports, essentially to muscle out competition. And ultimately, it means consumers pay more for a ticket, right? Less competition, then obviously often your prices go up. Major airlines including Qantas and Virgin were accused of doing this at Sydney Airport, so much so that the federal government launched an audit into the matter.

The Transport and Infrastructure Minister Catherine King joins me in the studio to tell me what they found. Minister, welcome.

CATHERINE KING [MINISTER]: Thank you very much for having me on, Patricia.

PATRICIA KARVELAS: So you’ve released this report this morning. What did you commission and what have you found about what was happening at Sydney Airport?

CATHERINE KING: We commissioned the first audit into how those slots, those landing and take-off slots out of Sydney Airport, are being managed and what’s actually happening with them. And so while the report found that everything the airlines are doing are within the rules, it said that basically they tactically make decisions about where they’re cancelling flights and how they’re managing those. That really- isn’t really in the spirit of what the slots and demand management system at Sydney Airport is about. So we’ve got a bill before the Senate today that we are hoping very much gets passed. We need the support of the Opposition and the Greens. And this audit really backs in that we need to reform the slots out of Sydney airport, and it backs in the bill. So we’re hoping to get that passed today.

PATRICIA KARVELAS: That’s really interesting. So you say they’re operating within the rules but it must mean the rules are broken.

CATHERINE KING: Well, what it means is the rules are- the rules are being used in a way-

PATRICIA KARVELAS: [Interrupts] Gamed.

CATHERINE KING: Gamed, yeah. I guess that’s the right word. So what we’ve done through the ledge that’s in the Senate today is really crack down on that. We’ve done- change who the slot manager is. That’s out for tender at the moment. Bring the decision making into my department and to me directly as the decision maker, and then really substantially increase the penalties for slot hoarding or slot behaviour. So that’s before the Senate today and we’re hoping to get it through. But really, this is the first time we’ve done an audit, so we’ve got lots more transparency. There’s been some improvements, but again I think that tactical use of the slots is really the thing that we want to try and crack down on.

PATRICIA KARVELAS: And do we need rolling audits on this sort of thing?

CATHERINE KING: We’ll do more. So part of what we did with the Aviation White Paper is said we will regularly audit the slots and how that’s actually working. And if you think about the levers that the Commonwealth’s got in terms of competition, you know, the two things I think Rod Sims even on this program talked about is that you’ve got the way Sydney Basin operates and these slots, acting on that, and then also air services agreements. And we’ve actually increased the amount of air services agreements we’ve got as well substantially with another, I think, seven airlines, just recently announced like Canada, Vietnam, Turkey - obviously flying out of Melbourne - which is great news as well. So doing all of that really does help with competition.

PATRICIA KARVELAS: You took the process of who arranges the airport slots to tender. Can you be sure there won’t be a repeat of a perceived conflict of interest after Qantas and Virgin were majority owners of the company, which was previously in charge? Obviously people looked at that and thought, that doesn’t look right.

CATHERINE KING: No, and I think they- so the way the tender has been done is that there needs to be a lot more management of potential conflicts of interest, both actual and perceived. And that’s part of the tender process, the challenge we’ve got in this space, it’s a really specialist- not everyone can do it. And so you’ve got to know and understand how airports schedule their flights. You’ve got to know quite a lot. So we’ll see what comes out through that tender process. But I think a much stronger way of managing both the actual and perceived conflicts is going to be important as we go forward to decide who the person is or the company is. 

PATRICIA KARVELAS: You’d hope that doing an audit like this would increase competition by giving new entrants perhaps better access to coveted landing spots, but we’ve seen Bonza go under this year, Rex. What are the prospects of a third player?

CATHERINE KING: Yeah. Look, aviation is hard. Like, it is just hard. It’s a marginal business. Like, you know, you see the profits and you think that’s incredible. But they really- it is really hard. It’s very expensive. The planes are expensive. Staffing is expensive. Fuel is probably one of the major costs. So it’s just hard. And as much as, you know, Australia is a fantastic market, we’re just a bit smaller than some of the other markets as well. So it is challenging. So my job is to try and keep that competitive tension between our two big Australian airlines and try and also – as we’ve got Rex in administration as well – absolutely do everything we can to make sure that regional connectivity is happening. And that’s really the reforms the Government’s been working our way through, plus obviously through the Rex administration.

PATRICIA KARVELAS: How about a nexus between what you’re putting through the Senate and a reduction in prices? Because that’s- right now, listeners are pretty much thinking about that. Are we going to see a tangible decrease in our prices?

CATHERINE KING: Well, look, you will- I mean, they have been coming down. Obviously, the removal of Rex’s, particularly those intercity routes, has had an impact and there’s no doubt about that that was going to be the case. But what you are seeing is both airlines are bringing more capacity in, particularly in the domestic sense. I know that Qantas is about to do that. More capacity, I think really, this is a demand and supply issue. Our demand has been really increasing. It’s great. Australians are wanting to move about, particularly as we head into the holiday and Christmas period. So it’s great. But that supply has been constrained. And so, bringing more capacity in, I think both airlines are trying to do that. That actually helps with pricing as well and keeping that competitive tension, particularly in that Sydney basin, is pretty critical. 

PATRICIA KARVELAS: If you’re just tuning in, this is Radio National Breakfast, and Minister Catherine King is my guest. We’re talking about aviation. The white paper, the Aviation White Paper, you’ve already referred to it. You said when the white paper was released, that too many Australians have been left out to dry when flights are cancelled or disrupted. And putting my hand up here, I have a flight cancelled every week that I have to travel. It’s really annoying and has huge impact, can I say, on productivity…

CATHERINE KING: Always.

PATRICIA KARVELAS: …and just your ability to function. What is it going to take to introduce a mandatory scheme for airlines to compensate passengers for these disruptions and delays?

CATHERINE KING: Yeah. So look, we had a good look at that and what we’ve decided to do instead, which doesn’t rule out that there is a scheme in place that does that, but what it does- so we’re setting up an independent ombudsman. And so, that’s happening, so in the same way you’ve got a telecommunications ombudsman for complaints. But we’re also, as part of that, setting up a mandatory charter of rights, which really outlines what customers should expect. Now, currently, because you’re entering into a contract when you buy an air ticket, you are covered by the Australian Consumer Law. But if anyone’s tried to get a refund from an airline to you… 

PATRICIA KARVELAS: [Talks over] Yeah, good luck to you.

CATHERINE KING: …it is really hard. So, what we’ve done and we’ll just- a paper is about to come out in the next week or so, which basically says this is what we think the charter of rights should look like, and these are mandatory charters that airlines must comply with. And I’ve just had a look at it. I read it yesterday. We’ll put that out shortly. And then, you’ll have the ombud scheme. 

PATRICIA KARVELAS:[Talks over] So how will it include- how will it increase- Okay. So give you an example. The other day, I’m doing this for the listeners actually…

CATHERINE KING: Yeah, sure.

PATRICIA KARVELAS:… just the practical sense. I get another one of those Qantas text messages saying your flight’s just been cancelled. We’ll let you know.

CATHERINE KING: Yeah.

PATRICIA KARVELAS: What are your rights around that? When you’ve got an entirely different time, it affects an important meeting you’re trying to make.

CATHERINE KING: Yeah. So the charter of rights will outline when there has been a cancellation, that the airline must help rebook you on another flight; if they’re not able to rebook you on another flight, that they need to refund you and they need to refund you within a reasonable time. And so, the charter will outline all of those things. Going out to consult with that shortly to go out- and hopefully, people will have a good look at it and say this is right or not. And then, you’ve obviously- if they don’t comply with that, you’ve then got the ombudsman to complain to get your rights upheld.

PATRICIA KARVELAS: Okay.

CATHERINE KING: That’s how we’re planning to do it. Part of the problem we’ve got is, some of the big European schemes, they’re really costly to administer. So that’s either priced into your ticket. And then, what happens is the airlines also risk writing that into your price of your ticket as well. So it potentially does lead to an increase in airfares. So that’s what I was a bit worried about. That’s why we haven’t quite gone down that way. But the ombudsman scheme, we think, will be a better way of doing that.

PATRICIA KARVELAS: And do we know that won’t increase ticket prices?

CATHERINE KING: That’s certainly because it’s being funded by the taxpayer. Basically, we’re funding it and then eventually, we-

PATRICIA KARVELAS: [Talks over] They can’t pass the buck?

CATHERINE KING: No. That’s our plan.

PATRICIA KARVELAS: And if they pass the buck?

CATHERINE KING: Well, that is our plan. So we-

PATRICIA KARVELAS: [Interrupts] They love to pass the buck.

CATHERINE KING: Well, they all do. That’s part of the nature of doing business. But the plan is to do it that way. And really, frankly, the best thing is that your flight is actually on time and you get what you pay for. So let’s try and encourage that behaviour as much as we possibly can from our airlines.

PATRICIA KARVELAS: [Talks over] Well, more of that. Absolutely.

CATHERINE KING: You’ll have had the same experiences I have as well.

PATRICIA KARVELAS: Infuriating. Minister, thank you for joining us.

CATHERINE KING: So lovely to be with you, Patricia, and Merry Christmas.

PATRICIA KARVELAS: Yeah, you too. I’ve actually worn colours that are Christmas-themed today. That’s how Christmassy I’m feeling.

CATHERINE KING: You’ve got a sparkly colour on. I’m impressed.

PATRICIA KARVELAS: Yes. Thank you very much. Minister for Infrastructure, Transport and Regional Development and Local Government, Catherine King.