The Government’s Aviation Green Paper made a minimal splash in today’s media. If not for the Qantas-British Airways anti-competitive plot, the paper might have been reduced to what it meant for Sydney Airport. Perhaps it’s the subject matter. Warren Truss gave a press conference in response yesterday afternoon with minimal turnout.
It should also be noted that the Green Paper shows the Government continues its approach of taking policy development seriously, through a formalised Green/White Paper process. This sort of thing doesn’t mean much for voters, but it continues to demonstrate how, in many areas, this Government is demonstrably better than its predecessor.
The lack of media interest is a pity, because the Paper is one of the more outright protectionist documents that has emanated from an Australian Government for some years. Qantas’ David Epstein, who committed not to undertake lobbying activities for his new employer for twelve months, needn’t be too worried. Based on the Green Paper, Anthony Albanese is intent on keeping the aviation sector as the most anti-competitively regulated industry in the country along with the broadcasting sector.
Many Australian industries have a strong tendency to consolidation and oligopoly. Normally the role of government is to prevent that through the Trade Practices Act and the ACCC. In aviation, the role of government is quite the reverse — to stymie competition in the interests of the domestic sector and one company in particular.
The mooted BA-Qantas merger deal shows that even with extensive government protection, too much consolidation is never enough. A Qantas-BA merger would be emblematic of the mindset of so many Australian companies: forget about innovation, quality products and service and building brand loyalty — just eliminate competitors, exploit regulation and rentseek.
“The Government is committed to pursuing the liberalisation of international aviation to benefit consumers and to provide Australia’s airlines with the opportunity to compete effectively with their global rivals,” says the Paper. The “and” is critical, because on international routes the interests of consumers come way below the desire to “provide Australia’s airlines with the opportunity to compete effectively.”
But what’s fascinating about the paper is how it trots out the same clumsy protectionist arguments that you can see demolished in Year 11 Economics textbooks.
“…liberalisation needs to be balanced with what is in the nation’s interest, as our aviation industry competes in an environment where not all countries apply the same rules.”
That is, because other countries protect their aviation industries, we should too. Our farmers and manufacturers would love to see that logic extended to them.
One of the few competitive rights Australia does have is access to the trans-Pacific route between Australia and the United States. The Australian Government has made it clear that it has no immediate plans for additional third country access to the route at this time to allow V Australia a reasonable opportunity to establish its operations.
So Singapore Airlines, which wants to compete on the trans-Pacific route, will continue to be prevented from offering competition on the route, until some indefinite point in the future. That’s called the “infant industry” argument, and the classic response is “infant industries never grow up.” The Paper offers no indicators of how “a reasonable opportunity” will be assessed or who will assess it.
Oddly enough, this cosseting is not applied to the aviation cargo sector, where the Paper supports “fully open arrangements”. Plainly there’s some distinction between flying passengers and flying cargo that means normal economics doesn’t apply.
Aviation policy exists within a timewarp — government thinking is hopelessly hamstrung, sounding like something from the 1960s. There’s even a proposal for local production and investment requirements to blackmail foreign airlines into exchanging investment for access to international routes:
The Government will maintain the legal requirement for majority Australian ownership of Australia’s international airlines, including Qantas, to ensure a strong, Australian-based aviation industry continues into the future. It may, however, be timely to consider whether the additional ownership restrictions currently imposed on Qantas remain appropriate. The Government will consider removing the intermediate caps under the Qantas Sale Act of 25 per cent on individual foreign airlines and 35 per cent on aggregate foreign airline interests.
Well, that’s a start, but we’re still wedded to this obsession with a national flag carrier. At a time when international capital is becoming harder to access, we’re still placing irrational nationalistic obstacles in the way of foreign investors. Ownership of Qantas could be assessed under the “national interest” provisions of the FATA like most other sectors.
While the Coalition had a brief flirtation with aviation liberalisation under John Anderson, it never amounted to much, and Mark Vaile reverted to type as the Minister for Qantas. Albanese is following a bipartisan tradition. For the Coalition, it was always the trade-off between regional services and protecting Qantas, which warned that it would not operate on “unprofitable” regional routes if foreign competitors were allowed to compete on lucrative international routes, where regulation ensured Qantas could gouge travellers. For Labor, it’s the heavy union presence in the Qantas workforce to be protected. Either way, international travellers and the tourism industry are the victims of the racket.
It’s been nearly a decade since the Productivity Commission considered international aviation. It’s time it was again asked to apply its forensic gaze to how much aviation protectionism is costing Australia and whether the claimed benefits actually exist. But unlike the Bracks automotive and TCF reviews, there is no formal role for the PC in the Green Paper.
And if international aviation issues are stuck in a timewarp, when it comes to a second Sydney Airport, it’s Groundhog Day. The Paper proposes to “initiate a process” to identify a second Sydney airport. To the extent this upsets the gouging monopolists who currently run KSA, that’s a good thing, but we’ve all been through this process before and we know that the politician has not yet been born who will build an airport close enough to Sydney to actually make a difference. The 2020 Aviation Green Paper will doubtless make exactly the same announcement about looking for where to put the new airport.