Push to change Jetstar and Qantas that every passenger needs to know about

By ASHLEY NICKEL, NEWS REPORTER, AUSTRALIA

Published: | Updated:

Qantas could be forced to sell its budget company Jetstar under a proposal to make room for more competition in the aviation industry.

Coalition transport spokeswoman Bridget McKenzie called for the government to regulate the sector through forced divestiture - which sees businesses sell off its subsidiaries.

It is part of the Opposition's wider push to open several high-profile markets to increased competition, much to the dismay of head retailers, the Australian Financial Review reported.

Its strategy already saw the party ask several companies, including Bunnings, to a parliamentary inquiry into price gouging and the mistreatment of suppliers.

Calls for the government to have a heavier hand with several key industries - including aviation and supermarkets - are expected in the early half of next year ahead of the federal election, which must be held by May.

Opposition Leader Peter Dutton has expressed his approval of the proposed measures, championed by National Party MPs. 

Senator McKenzie believed if Treasurer Jim Chalmers did not support the divestiture of Qantas, he will have failed to 'ensure consumers' interests are protected, and not at the mercy of the entrenched duopoly'.

'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,' she said.  

Qantas could be forced to sell its budget company Jetstar under a proposal to make room for more competition in the aviation industry

Qantas could be forced to sell its budget company Jetstar under a proposal to make room for more competition in the aviation industry

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If Qantas were to drop Jetstar it would create more room for a third major airline to challenge Qantas and Virgin Australia, which together hold 97 per cent of Australia's domestic aviation market.

That market already squeezed out two competitors this year - Bonza and Regional Express.

The introduction of another carrier could lead to the reduction of domestic airfares with a Treasury paper in late August concluding the entry of a second airline on any route leads to prices falling by up to 10 per cent.

Transport minister Catherine King shared her belief Australia's small population could not support a third carrier following the collapse of Rex in July.

However, Australian Travel Industry Association chief executive Dean Long claimed there was 'clear room in the market for at least three, clearly defined airlines' as Australia already had three - Jetstar, Qantas and Virgin, owned by two businesses.

'There's no reason why we couldn't have a third, robust company in the market if the competition settings were right,' he said.

'That means slot reform at Sydney Airport, because if you can access Sydney Airport you can be profitable – that's fundamentally the reason challenger carriers don't work.' 

If Qantas were to drop Jetstar it would create more room for a third major airline to challenge Qantas and Virgin Australia, which together hold 97 per cent of Australia's domestic aviation market

If Qantas were to drop Jetstar it would create more room for a third major airline to challenge Qantas and Virgin Australia, which together hold 97 per cent of Australia's domestic aviation market

Senator McKenzie called for the government not to specifically force Qantas to sell Jetstar but instead wanted to see it handed the powers to do so.

A review into Australia's aviation sector last month proposed the government introduce an ombudsman with powers to force airlines and airports to follow their own terms and conditions.

It also recommended an overhaul of the landing rights at Sydney Airport, the country's largest, to allow room for more international carriers. 

The most recent Australian Competition and Consumer Commission report found the price of airfares have continually decreased following a peak immediately after the Covid pandemic.

It recorded a 5.2 per cent drop in the last 12 months alone.

Qantas CEO Vanessa Hudson last month attributed the company's $2.1billion earnings to its two-brand strategy, which gave it footing at both ends of the market.

'Qantas benefited from increased corporate and resources travel and ongoing high demand for international premium seats while Jetstar delivered its highest result as it grew to meet increased demand from price-sensitive leisure travellers and saw the benefits from its new aircraft,' she said.

Qantas declined to comment.

QantasJetstarPeter Dutton

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