Qantas’ annual report has revealed just how much more the airline is gouging its customers, with the crucial cents-per-kilometre metric leaping almost 40% last year compared to pre-COVID figures. Yet the national carrier’s costs, including the fuel expenses it constantly blames for high airfares, have only risen 20% during the same period.
The report also shows the two main divisions responsible for the company’s $2.47 billion profit — which netted its executives and directors bumper pay rises — were Qantas mainline international and domestic. This is due in no small part to the Albanese government’s determination to protect Qantas from competition, despite the prime minister declaring that we have “the most competitive aviation market in the world, bar none”.
It does at least have another option that is long overdue: legislation to guarantee air traveller schedules rights and compensation for delayed and cancelled flights. This is available in the European Union, Canada and the US — with even stronger legislation currently moving through the US Congress to bolster existing protections.
Australia lags behind
If a flight is delayed by more than three hours in an EU country, each passenger receives €250 (A$415). In Canada, a three-hour delayed flight means a passenger receives C$400 (A$460) per passenger. In America — at present — it’s US$100 (A$155). In the EU, there is also a sliding scale, so the longer the delay the more compensation. In Canada, compensation rights climb up to C$1,000.
EU laws extend to any flight from any EU airport. If an Australian passenger has a multi-leg flight, they have rights on different legs — if they have a flight from an EU airport and it’s delayed, then they have rights for that leg. The Biden administration will propose tougher new regulations by the end of the year, but it could take years to finalise these rules — which are being questioned by airlines.
In Australia, passengers have no specific protections, service guarantees or automatic rights for cancellations, delays, changes or baggage delays.
This is despite the government’s protection racket for the Qantas — handing over $2.7 billion in subsidies during the pandemic and turning down a bid by competitor Qatar to provide another 28 flights a week to crack open the Emirates/Qantas dominance of European routes. This lack of consumer protections applies not just to Qantas but to its Australian competitors Virgin, Rex and Bonza.
Yes, Australia has broad consumer guarantees, but they don’t necessarily apply if a factor “beyond the control” of the business was why a service wasn’t provided. If an airline couldn’t fly because there were COVID restrictions, for instance, then airlines were not required by law to give you a refund. It all comes down to the individual airline’s terms and conditions — and they all favour the airlines.
“In the EU, there are really clear, clear rights that if your flight is delayed you’re entitled to certain types of compensation,” Alan Kirkland, chief executive of consumer advocacy group CHOICE, has said.
“The compensation changes depending on the duration of the delay. But there’s just absolutely nothing like that in Australia. We think Australian consumers should have similar rights to people in the EU with really clear compensation rights where flights are delayed or cancelled. We have been calling for much clearer rights for consumers to refunds and compensation when travel arrangements in general, including flights are delayed or cancelled.”
Australia does have a consumer protection system, but it is second-rate and toothless. The Airline Customer Advocate was set up by the last Labor government in 2012 and is a voluntary scheme. But it is inadequate; it has no power. If you are not happy with an airline, you can go to the ACA — and they send it back to the airline.
An ombudsman, many argue, is long overdue. The Transport Workers Union has proposed a Safe and Secure Skies Commission that would guarantee protections. The ACTU has also engaged Australia’s best-known competition regulator Allan Fels to look at the effect of pricing on inflation and he, too, has Qantas in his sights. “Lack of competition is a key driver of prices,” Fels said.
The technology problem
The other thing that deeply affects customers and their ability to get refunds and new flights is technology. It has become abundantly clear that under the stewardship of Alan Joyce, Qantas scrimped on and delayed major information technology investments. Like Qantas aircraft fleet, its maintenance facilities and, well, just about everything except the Chairman’s and First Class lounges, technology has been a victim of chronic underinvestment.
Old “legacy” technology is a key reason, insiders say, behind the refund debacle and the selling of tickets on cancelled flights. Both disasters exposed the clunky and non-adaptive nature of the airline’s technology platform. Customers will notice that Qantas’ main website has remained static for well over a decade.
Quite how much a technology overhaul will cost is unclear, but it’s worth noting that US airline Southwest — whose systems famously melted down during last year’s US holiday season — earlier this year committed US$1.3 billion to an IT upgrade.
It’s unclear how big Qantas’ IT problem is, but insiders from various parts of the business believe it’s significant. The airline has about half as many aircraft as Southwest (337 vs 775), so let’s cut that figure by 50%. This means the major IT overhaul, which chairman Richard Goyder quietly signalled in the annual report, could cost Qantas approximately A$1 billion. Another major headache for new CEO Vanessa Hudson and her bottom line — not to mention the disruptions and delays that come with such projects.
Still, all the good systems in the world won’t help Qantas become an ethical, customer-focused company. Tough and clear consumer protections around it — and the rest of the Australian airline industry — will.
