Could COVID-19 provide an opportunity to reshape competition among domestic airlines and make it easier for challengers to take on the established duopoly of Qantas and Virgin Australia?
That's the hope of the Australian Competition and Consumer Commission, which is lobbying for changes in how airports assign take-off and landing slots.
In its submission to a Senate inquiry into the future of Australia's aviation sector, ACCC Chair Rod Sims noted that "access to slots at Sydney Airport is a key barrier to entry and expansion in Australian air passenger services markets."
Airport curfews and physical limitations on runway movements mean that a number of Australian airport are "slot-constrained", which makes those slots a precious asset for airlines.
And under the current rules, slots allocated to an airline remain with them indefinitely.
'Slot hoarding' stymies competition
However, the consumer watchdog said the "hoarding of airport slots" reduces rivalry between airlines which would otherwise "encourage cheaper airfares, more favourable terms and conditions, better quality inflight services, more frequent services and a broader network reach."
The ACCC flagged concerns over airlines scheduling flights "for the purpose of retaining a slot but with no real intention of operating the flight, and likely cancelling the flight close to its schedule departure time... to prevent a competitor from accessing those slots."
Sydney Airport was singled out in the ACCC's submission as an example of a heavily slot-constrained airport, especially during peak early morning and late afternoon periods of a weekday.
But with domestic flying on the once-crowded Sydney-Melbourne-Brisbane 'triangle' now at an all-time low due to ongoing border closures, and international flights pared to almost zero, the ACCC suggests this is the best time to rethink slot management.
It has suggested temporarily reallocating unused international slots for domestic use, to create a short-term "pandemic recovery pool" of slots, while airlines would be fined for not using allocated slots as an incentive for them to return slots they don't really need.
Slots under the microscope
Seperate to the Senate inquiry, in November 2020 the Federal Government released a "Sydney Airport demand-management discussion paper" to examine if changes are needed to both the slot scheme and the airport's current cap of 80 take-offs and landings every hour.
The fresh focus on airport slots comes as Regional Express prepares to challenge Qantas and Virgin on the east coast triangle from March 1, with fares starting at $79 for economy and $299 in business class.
Although Rex's startup fleet is a mere six Boeing 737 jets – all of which were formerly leased to Virgin Australia – the airline hopes to build up its network to cover "all the other capital cities and major cities in Australia."
"By the end of 2022... Rex’s ambition is to be a sizeable domestic airline operator with a fleet of 30 or maybe 40, maybe even more narrow-bodied single-aisle aircraft operating on the domestic network around Australia," Rex Deputy Chairman John Sharp says.
That expansion would of course rely on the availability of many more slots, not only at its Sydney hub but at other domestic airports.
However, Qantas Group CEO Alan Joyce believes there's simply no room in Australia's skies for a third major airline, with either Virgin or Rex set for a fall.
"My personal view is that this market has never sustained three airline groups and it probably won’t into the future," he said at this week's Reuters Next online forum.
"You can be guaranteed that Qantas will be one of them – it’s who else is going to be in the market place post this, and into the future is going to be interesting."