Nationals Senator Calls for Powers to Force Australia’s National Carrier to Sell Subsidiary

A photo taken on Aug. 22, 2023 shows a Airbus A321 Neo operated by the Qantas low-cost airline Jetstar at Kingsford Smith Airport in Sydney, Australia. William West/AFP via Getty Images

A Nationals senator has urged the Labor government to consider forcing Australia’s flag carrier Qantas to sell its subsidiary airline, Jetstar, claiming it will improve competition in the aviation industry.

On Sept. 9, shadow transport minister and Senate Nationals Leader Bridget McKenzie said it was time for the government to stop “protecting” Qantas and examine the use of divestiture powers.

McKenzie said the government had helped maintain Qantas’ market dominance with its decision to block competition from Qatar Airways, and prevent the Australian Competition and Consumer Commission (ACCC) from monitoring airfares.

At the same time, the shadow minister said the government’s unwillingness to carry out aviation reform was detrimental to Australian consumers and businesses.

“Labor’s inaction on reforming regulations that discourage competition has driven up the cost of airfares and permitted poor customer service,” she wrote in an op-ed for the Australian Financial Review newspaper.

“Australians want an airline sector where you have genuine choice, where your plane takes off and lands on time, and your bags arrive at your destination with you.”

Nationals Senators Bridget McKenzie at Parliament House in Canberra, Australia, on June 23, 2021. Sam Mooy/Getty Images

The State of the Airline Market

The comments come amid the fallout of regional airline, Rex, falling into administration, spurring questions about the viability of three independent airlines being able to operate in the Australian domestic market.

In fact, the suspension of Rex has seen ticket prices for Virgin and Jetstar rise, as of Sept. 9.

Previously Rex offered air fares for $87 to fly between Brisbane and Sydney inclusive of luggage, an offering that Virgin matched. Further, during Rex’s time operating out of the capital cities, it competed directly with Virgin on price and service, while forcing Jetstar into lowering its pricing.

However, without the regional airline, Qantas, Virgin, and Jetstar now operate in three different pricing tiers with limited overlap.

A Rex Airlines Boeing 737 departs Tullamarine Airport in Melbourne, Australia, on July 29, 2024. William West/AFP via Getty Images

According to recent data (pdf) from the ACCC, the aviation industry is dominated by the Qantas Group (comprising Qantas and Jetstar) and Virgin Australia, which accounted for 61.8 percent and 31.2 percent of the market share, respectively.

A separate report (pdf) by the Treasury found Qantas reduced prices when a non-affiliated competitor entered the market, while it raised prices when Jetstar did.

Nevertheless, the Treasury did conclude that Jetstar’s entry brought down average airfares and provided consumers with more options.

Labor’s Response

Assistant Immigration Minister Matt Thistlethwaite rejected McKenzie’s call for divesting Jetstar from Qantas.

“We all want to see more competition and cheaper fares, but this is a crazy economic policy,” he said in an interview with Sky News.

“Let’s say you do divest Qantas of Jetstar. Who buys it?

“And if no one buys it, then you’re left with less competition in the aviation market, and we’re all worse off.”

At the same time, the assistant minister said the Labor government had taken action to encourage more competition in the sector.

Thistlethwaite gave the example of the current Sydney airport, where the government had implemented a new system to manage the slots differently.

“We acted, we brought in a new system to manage those slots to make it easier for new operators and competitors to get into that market, to get access to those slots,” he said.

“I think that the Western Sydney airport coming online in a couple of years will make a big difference and there will be an opportunity for new players to come into the market.”

Nevertheless, the assistant minister acknowledged that the Australian market was not a big one and that the government had to “make the best of what we’ve got” to maintain ongoing competition.

Travelers wait in line for a flight to Sydney, Australia on Qantas Airways Ltd. inside the Tom Bradley International Terminal at Los Angeles International Airport (LAX) on Nov. 1, 2021. Patrick Fallon/AFP via Getty Images

Nationals Leader

Qantas’ Rough Year

The Coalition’s call for divesting Qantas comes after the airline had a rough year, with plummeting revenue and reputation.

In its latest financial report, the company posted a profit after tax of $1.25 billion (US$840 million) in 2023-24, down 28 percent from the previous year.

In March 2024, Qantas accepted a $100 million fine for selling cancelled tickets to thousands of customers during and after the COVID-19 pandemic.

Qantas also agreed to compensate more than 86,000 affected customers with $20 million cash.

The company also dropped in the worldwide airline rankings, falling from 17th place in 2023 to 24th place in 2024.