It’s amazing what a lack of competition achieves. Qantas yesterday revealed that it was finally responding to lower world oil prices by trimming its international fare surcharges by $5 to $15 per trip, but there was no movement on domestic fares.

CEO Geoff Dixon told yesterday’s annual meeting that the decision to lower the surcharge on international flights followed a recent sustained fall in the price of fuel: “If prices continue to fall, we will extend the reductions to our domestic surcharges, which were not included in the most recent increase in August 2006, and look at further reductions to our international surcharges”.

On the face of it what he said about international flights applies equally to domestic flights, but there’s a catch. Some of the airline’s nasty competitors (a word hated at Qantas and in the boardroom), such as Singapore and British Airways, have already cut their surcharges and to remain vaguely competitive, Qantas has to be seen to do the same.

But within Australia, Qantas has 65% of the market, Virgin Blue just over 30 plus Rex and a couple of other smaller competitors – there’s no competition. Since Richard Branson sold out to Patrick and then Patrick was taken over by Toll, there’s no interest in Virgin Blue being an aggressive price cutting competitor.

Domestic air travel is a nice fat duopoly – it’s Qantas’s main source of profits (forget the guff about Jetstar, its just there to continue to drive down costs) – like the beer industry and like media is becoming. Remember James Packer is a director of Qantas and Geoff Dixon is a board member of PBL. If PBL or News Ltd gets hold of the Australian Financial Review you won’t read stories like this: you don’t read or hear or see them in PBL media outlets.

Peter Fray

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