Competitive Tender for Sydney Airport Slots Open Following Rex, Bonza Collapse

Travellers wait in long service lines at the Sydney domestic airport in Sydney, Australia, on July 19, 2024. (Saeed Khan/AFP via Getty Images)

The Sydney Airport is gearing up for a major shake-up that will facilitate the entry of new airlines to secure slots for take-offs and landings. This move forms part of the Albanese government’s slot system reforms announced in February.

The government has opened a competitive tender, requiring prospective slot managers to demonstrate how they will deliver the reforms, as recommended by the Harris Review and the Australian Competition and Consumer Commission (ACCC).

The prospective managers will also need to demonstrate how they will handle and mitigate conflicts of interest transparently.

Several market players and experts have already raised concerns about slot management at the Sydney Airport, with some airlines being accused of slot hoarding.

Currently, Airport Coordination Australia, which is majority-owned by Qantas and Virgin Australia, is responsible for the slot allocations at the Sydney Airport.

“Our reforms to the slot system at Sydney Airport are an important part of improving competition and significantly increase transparency,” said Catherine King, Minister for Infrastructure, Transport, Regional Development and Local Government.

“We are serious about making long term reforms to aviation in Australia that are much needed after a decade of neglect.”

The reforms will also require airlines to provide regular information on how they use slots.

The government has already implemented some of the recommendations, including an independent audit of slot usage and the re-establishment of the Compliance Committee for Sydney Airport to manage compliance with the rules.

Results of the independent audit will be published once completed.

Meanwhile, the Australian Airports Association (AAA) welcomed the opening of the competitive tender, emphasising that removing barriers for new entrants will help increase competition among airlines.

“We’ve lost two airlines to financial collapse from the domestic sector in just three months, a clear sign we need to urgently take a different course and strengthen competitiveness in Australian aviation,” said Natalie Heazlewood, AAA Head of Policy and Advocacy.

“Sydney Airport plays a crucial role in connecting communities and enabling economic activity and these improvements will only enhance that capacity.”

Rex Airlines Enters Voluntary Administration

The competitive tender comes just a week after Rex Airlines collapsed into voluntary administration.

AAA’s research showed that Rex Airlines was already gaining a foothold in Sydney-Melbourne-Brisbane, otherwise known as the Golden Triangle, with a 31 percent increase in seats sold in that market between 2022 and 2023.

Rex Airlines is the second Australian air carrier that entered administration, next to Bonza in April.

“Labor’s lack of aviation competition policy has seen two airlines into administration in four months with job losses, less choice and higher airfares for travellers,” said Bridget McKenzie, Shadow Minister for Infrastructure, Transport and Regional Development.

“The Albanese government has failed to address the harm being inflicted on smaller airlines trying to compete and to the disruptions and increased costs on Aussie travellers.”

New Slot Manager to Foster Competition Amid Duopoly

Earlier, former ACCC chairperson Rod Sims said that the airline industry has been dominated by a duopoly, with Qantas and Virgin dominating the market.

“If we’re thinking aviation, the slots are the crucial issue to open up competition. That’s why it’s dreadful that they’re being governed by the companies that are benefiting from them,” said Sims.

The ACCC has been publishing reports about airline competition in Australia. However, Qantas and Virgin said they do not support continuing the review.

Meanwhile, both Rex Airlines and Bonza executives expressed difficulties in competition even before their collapse.

“If you were running an airline like Qantas, would you deploy an aircraft that’s worth US$20-odd million, with all those crews and backup services, into a market that had 134, 210 or 417 passengers for the month? That’s not a commercial judgement in my view, but that’s exactly what Qantas did, and they did it into routes that they'd never shown any interest in until we announced that we were going to move into the domestic airline market,” said John Sharp, chairman of Rex Airlines.

Bonza’s CEO, Tim Jordan, noted there had been a zero percent growth in low-cost travel options during the decade up to COVID-19.

“In 2010, there were 58 low-cost operated routes in Australia. In 2019, just pre-COVID there was—guess what—58 low-cost operated routes in Australia,” he said.