Calls for powers that would enable government to force Qantas to sell off its discount airline Jetstar are nonsense and clearly show a lack of understanding of the aviation landscape and how the industry works.

On Monday opposition transport spokesperson Bridget McKenzie published an op-ed in the Australian Financial Review which accused the Australian government of failing on high airfares and lacking the tools to force airlines to divest their subsidiaries.

Certainly, airfares are higher post COVID – but they are higher across the globe as airlines battle a host of cost pressures from inflation, the high cost of the return of the fleet, lack of staff and shortage of parts to name just a few.

While the Qantas Group is profitable its net average profit on each passenger is just $24.

And yes, airlines like Qantas, Jetstar ad Virgin Australia have let passengers down but so has virtually every airline in the world post COVID.

The fact is that airfares today in Australia are 42% (Best Discount) and 36.4% (Business Class) lower than they were 20 years ago according to Australia’s Bureau of Infrastructure and Transport Research Economics (BITRE).

Jetstar since its launch of services in 2004 has carried 400 million passengers and over half of those have travelled om fares under $100.

Splitting up Qantas and Jetstar would simply increase the cost base of both airlines.

Take fleet for example. The recent deal with Airbus for almost 200 aircraft brings enormous cost benefits of a huge purchase as well as flexibility to swing aircraft by number or type from one operation to the other as the market and economic climate shift.

And who would buy Jetstar? The recent collapse of Bonza and Rex underscores how difficult it is to succeed in Australia with its small population and huge size.

Over the decades dozens of airlines have collapsed in Australia. Ansett when it failed in 2001 was made up of 66 airlines that had been forced to merge or collapse over 65 years.

All told 321 airlines have ceased operations, gone bankrupt or merged in Australia since the first passenger flights just over 100 years ago in Western Australia.

Not well understood is Australia has one of the world’s most liberal aviation policies which allow foreign companies to start airlines in Australia.

Sir Richard Branson led the way when he launched Virgin Blue in 1999, while Singapore Airlines tried and failed with Tiger Airways in 2007. The door is open to any foreign owned airlines to try the Australian domestic market.

So why don’t they? Frequent Flyer programs.

Australians are rusted on to their frequent flyer points and status credits and will not budge. Qantas has 16.4 million members, well over half the population of Australia. Virgin Australia has over 12 million members. That is huge loyalty with members weaving their financial and buying lives around accumulating points.  

Australia needs Qantas, Jetstar and Virgin to be profitable so these airlines can invest in new aircraft that slash fuel burn by between 20 and 40% compared to the aircraft they will replace.

For instance, the 787-9 burns 34% less fuel per passenger than the giant A380, the 787-10 and A350 (for regional and domestic routes) that Qantas has on order will burn even less per passenger and that is what brings real reductions in airfares.