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The Forum > Article Comments > Australia, it's time to deregulate the skies > Comments

Australia, it's time to deregulate the skies : Comments

By Jonathan J. Ariel, published 12/6/2015

Will cabinet stand up for Australian consumers or for special interests?

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Disagree, we've seen enough local airlines go to the wall, without giving foreigners an entirely unfair advantage!

All we need is competition, and we already have that in spades.

What would put some real competition and much lower fares in the hands of Aussie travelers, would be a very fast train plying the eastern seaboard.

And perhaps that's where we invite foreign providers in?

Say the Chinese and Chinese built Mag/levs? Which would allow us to actually afford them?

And what difference would that be, when measured against tax avoiding foreign operators plying our skies with foreign built planes, fueled with foreign oil, maintained in foreign lands by foreign staff and possibly crewed by foreign flight crews?

And that's before you even begin to factor in our homeland security, let alone local jobs!

Alternatively we could continue to chase our tails toward the totally mindless common denominator; which can only ever harm all of us ultimately!

This land and our egalitarian society was built on the back of the simple fair minded concept of a fair days work for a fair days pay and a fair go!

Eroding that by any means can only ever destroy both!
Rhrosty.
Posted by Rhrosty, Friday, 12 June 2015 11:25:16 AM
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Australia has a love affair with monopolies, for some strange reason. Think Macquarie and Sydney Airport.

If a monopoly is not possible, then a duopoly is the go. Which has been par for the course in the airline business since Moses played full forward for Collingwood - from TAA/Ansett to Qantas/Virgin, lock-step price management, lock-step scheduling. Flying Sydney to Melbourne? Timetables and fare structures are virtually identical, every day of the week. As they have always been.

And if a duopoly ain't possible, try an oligopoly; when was the last time our four big Banks actually competed? Together their annual profits exceed $1,300 for every man, woman and child in Australia, which we pay out of out after-tax income, of course. A tribute to their management excellence, the irresistible nature of their "products", or simply a systematic gouging of the Australian public?

Why do we put up with it?

I suspect there is an undercurrent of xenophobia here that the government exploits every time there is the whiff of competition from them damned furriners. Add to that the fact that we somehow idolise the Dick Smiths of this world, who blatantly make a motza out of importing junk and making their billions, then whine about buying Austrayan when the heat is on.

One day soon, we will find that we have priced ourselves out of every single market - even tourism. That's when we will have the recession we deserve.
Posted by Pericles, Friday, 12 June 2015 11:42:35 AM
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It's not just about the profitability of our airlines, but also the workers. Wages on foreign airlines are significantly lower than their domestic counterparts. And there are significant safety issues that would have to be overcome before it can be approved.

FWIW I think we should allow more cabotage. But rather than restricting it to northern Australia, we should do it on a fuel stop basis: if they stop to refuel an aircraft somewhere in Australia that doesn't involve significant detouring, they should be able to take passengers from there to their ultimate Australian destination. Those passengers should be charged a cabotage tax (possibly an extra $5 on aircraft with less than a hundred seats, $10 on single aisle aircraft with more, and higher with widebodies). It should not be permitted to or from our four biggest airports. And it should only apply to airlines based in countries where our airlines have fifth freedom rights.
Posted by Aidan, Friday, 12 June 2015 2:15:12 PM
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How to make a small fortune in aviation?
Answer:-
Start off with a large fortune.
Posted by warmair, Friday, 12 June 2015 4:52:42 PM
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Rhosty touched on today's main problem with air fares - lack of competition.
He thinks laterally when he suggests super-fast rail.The need is to be able to go from one place in this huge nation to another at the most competitive cost.
It doesn't matter if that is by air,rail or high speed bus; what will make low fares happen is competition.
The existing airlines have had heaps of time to work out ways of lightening passenger costs, but have not had the force of competition breathing down their necks to make them deliver.
If more people can travel cheaper by air anywhere in Australia, not just the north, then flying becomes a very attractive practical product which would generate vastly increased turnover.
Remember the days when it was the "norm" to fly to the U.K. in about a week for a cost equal to a year's salary? Compare it to today, and thank competition for the difference.
Posted by Ponder, Friday, 12 June 2015 5:37:38 PM
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Ponder, the difference is the result of better technology, not competition.

Competition has brought lower prices, and often better service, but it can't make an unprofitable service profitable. Better technology can.

We do need high speed rail, but not for the sake of competition. It uses much less fuel than aviation, and it is much easier to use renewable energy to power it. And it can provide a very large amount of capacity.

And of course once we get high speed rail, it will provide competition on some very busy routes. But there's currently no shortage of competition on the busiest routes anyway. High speed rail won't be viable in Northern Australia until the population is much higher.
Posted by Aidan, Friday, 12 June 2015 6:08:07 PM
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Get rid of shareholders
every business that has shareholders has high prices and poor service
this is what kill businesses
Posted by Aussieboy, Friday, 12 June 2015 6:57:05 PM
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Aidan; what you say with regard to the north is essentially correct, and with regard to passenger services!

However, one could make a compelling case for very fast conventional freight trains plying between Adelaide and Darwin, and then between Darwin and Port Headland.

And maybe up the guts between Melbourne and Brissy? Sydney to Perth?

And supplied as electrified double decker container trains at least a mile long and able to travel at speeds better than 300 Klms PH.

And there's a sound financial case to be made for re-engineering current rail routes to enable those speeds? Over/under passes, stock proof fencing and cambered corners i.e.

And where profitable, add a couple of tag-a-long double decker carriages; as say sleepers for passengers wanting to just get from Adelaide to Darwin/Melbourne to Brisbane i.e?

Although, I'm not sure how well rested they'd be, screaming around heavily cambered corners at better than 300 klicks?

Hasbeen, who's piloted both jets and racing cars would likely feel right at home; and even lean into the turns, or maybe constantly reaching for the ejection lever along with a few mumbled explosive expletives?

Me? I'd likely pass lots of wind with lots of lumps in it!?
Rhrosty.
Posted by Rhrosty, Saturday, 13 June 2015 10:54:11 AM
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Rhosty, I can tell you don't know much about railways – for a start you don't know the difference between camber and cant! Railways, having only two rails, do not use camber. The curves can be heavily canted, but there's a limit to how much cant can be used as the trains do sometimes have to stop.

You could not make a compelling case for very fast conventional freight trains at all. Compared with conventional trains, very fast trains are much more expensive to run. The track also needs to be built to a much higher standard. It is totally unsuitable for double stacked containers (both aerodynamically and in terms of wheel/rail forces. Even single decker container trains would be a big technical challenge at those speeds. If we could do it, we would find a lack of demand, as few companies would be willing to pay the cost of sending their containers that fast. What's needed for most freight is not speed but reliability and low cost.

BTW construction of the Adelaide to Darwin line didn't result in the anticipated container freight boom, but instead in a lot of bulk mineral trains. So if there were a demand for very fast trains on that line, and the track were good enough to run them, a lot of overtaking facilities would be needed.
Posted by Aidan, Saturday, 13 June 2015 12:04:32 PM
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The only thing more costly & inefficient than shareholder owned companies Aussieboy, are government owned corporations, or contractor. Nothing like giving the unions control of something to make it a catastrophe, just think our sub building efforts.

Rhrosty I'm afraid fast rail would make even greater losses than ordinary rail. In Oz, apart for commuter services they are catastrophically expensive to run, & are a dead loss to the community. We can largely thank the unions for that too.

In Queensland we built at huge expense, the tilt train system. Even then we only did half a job, with too many slow corners to slow them down, & add heaps to the fuel bill. The Brisbane Cairns trains are book out months in advance, & it is almost impossible to get an intermediate ticket for a part of the route.

They could fill twice as many trains & carriages, particularly with cheap pensioner passengers, but will never do it. The more passengers carried, the greater the losses, & that is with a half baked system. To allow the thing to travel anywhere near the speeds it could achieve would cost so much more in track development it just won't happen. The resumptions required to reduce those tight bends alone would be ruinously expensive.

Returning to using shipping is the answer, if only the unions could be controlled, to allow foreign ships to carry our bulk freight.
Posted by Hasbeen, Saturday, 13 June 2015 1:04:04 PM
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Rhosty

You say we shouldn’t give “foreigners an entirely unfair advantage”. My question to you is: shouldn’t an Australian who doesn’t work in the airline industry and is not a shareholder of QF or VA be entitled to choose from the widest array of airlines whenever and wherever he of she flies? Do you think Joe and Joanne Public in Darwin if given the choice to fly to Tullamarine with Etihad in a gleaming B-777-300 with a plethora of cabin staff for less than QF charges in an old rickety B-737 will choose to fly QF? And even if they do choose QF, shouldn’t they at least have the widest choice of carriers possible?

I don’t think typical passengers care about Etihad’s costs structures or how their decisions affect Alan Joyce’s bottom line.

How would the average consumer feel if she could only shop at Target? Imagine there being no Kmart, no Big W no David Jones. I don’t think when a person shops across different retailers they honestly care about the retailer’s bottom line. Or whether workers are paid for a good day's work. More often to the consumer it's his bottom line that matters.

This is proved daily at supermarkets when imported groceries outsell Australian products because to most folk: price is king. They don't have surplus cash to necessarily buy a 'feel good' local product.

You say we already have competition: “we already have that in spades “. I respectfully disagree when it comes to domestic air travel.

As to a VFT, if you are suggesting the billion dollar adventure be privately financed, then I am all for it! So long as:

(a) the taxpayer will not be on the hook for any sum the private sector doesn’t stump; and
(b) that QF and VA are forbidden from involvement in a VFT. By that I mean not seeing a repeat of the obscenity that not only saw Kingsford Smith Airport sold to MacBank, but Macbank was given the right of first refusal to build and operate the possible competitor to KSA, the new airport in western Sydney.
Posted by Jonathan J. Ariel, Saturday, 13 June 2015 9:16:18 PM
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Pericles

You talk about banks and their cozy set up in Oz quering

Why do we put up with it?

I wonder if it’s due to our spineless politicians who don’t want to upset financial donors as well as a media that knows not to rub their advertisers the wrong way. Think the millions of $ tabloids make from retailer catalogue inserts.

And then you have the chumminess between retailers (oligopoly) and their financiers (banks).

It’s well known that both our media and supermarket retailing is more concentrated than that of even Russia.
Posted by Jonathan J. Ariel, Saturday, 13 June 2015 9:17:23 PM
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Aiden

I agree that Australian airlines ideally should have the same access to foreign ports as foreign airlines should have to Australian ports.

But if such access is not granted by say Qatar, Australian travellers are still better off with Qatar Airways flying say Melbourne-Perth on their run to Qatar.

Both Australian consumers of air travel and in this example, Qatar Airways win from such trade. And whatever money Australians save by not flying the duopoly they can spend at other Australian businesses.
Posted by Jonathan J. Ariel, Saturday, 13 June 2015 9:20:12 PM
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Jonathan J. Ariel, I'm not saying we should demand equal access. But I don't think it would be fair to grant cabotage rights to Indonesian airlines if Indonesia won't even let ours stop there on the way to somewhere else.
Posted by Aidan, Saturday, 13 June 2015 11:57:14 PM
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One interesting angle on all this is the battle presently being waged between the "US Three" and the "Gulf Three". The core issue is the use of government money to underwrite airlines - the US sees itself as fully commercial, and views the Gulf airlines as being supported by their governments.

There is of course a lot of conceptual wiggle-room on both sides - for example, the US government has on many occasions allowed its airlines significant protection from their creditors through Chapter 11, which the Gulf carriers see as a form of financial support. Which of course it literally is.

Underlying it all is the boundary between being government-supported and being fully commercial, and it is in this light that restrictions on foreign competition come along to blur the line even further.

Such restrictions are clearly a form of subsidy to the native industries, as is any form of protectionism. Taken to its logical conclusion, if we respect the laws of commercial competition, that lower the cost of goods and services to our citizens, there should be no such curbs. If, on the other hand, we feel that air travel is a key component of our global infrastructure, and should be guarded as a national asset, then the obvious path would be to have the government own the airlines.

Oh, wait...
Posted by Pericles, Sunday, 14 June 2015 9:50:17 AM
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When we put tourists on Australian planes, we are exporting something and or earning foreign capital!

However, when we put Australian travelers on foreign planes, we are buying an import and or contributing to an unsustainable record foreign debt.

Our 1.5 trillion plus super funds, would earn more money more reliably here and for them if invested in (tax free) self terminating thirty year bonds?

And where would one invest such a huge windfall?

Well we could start with a rapid rail system along the eastern sea board!

Our entire rapid rail system should be built underground, which needs only be in covered shallow trenches in many cases.

And as such, no longer mix or mingle with problematic traffic or stock! And as such, allow maximized speed to become the norm!?

Given solid rock walls, enable a lean as tight as 45 degrees? Which would be enough for speeds of 500 klicks or more?

Private financiers are already canvassing fast overnight rapid, mile long double decker rail, averaging 130 klicks!?

Trucks invariably burn fully imported diesel, electrified trains burn vastly cheaper local fuel!

Trucks also need to cope with considerable aerodynamics and hills, the later of which never ever applies to rail transport!

Trains also enable slipstreaming, which considerably reduces the drag anyway and provide far less surface resistance than occasional trucks or b Doubles, moving as a similar load moving convoy!.

Trains don't get bogged in the wet, even where the rail is covered in a foot of water!

Trains would compete with air, even where the speed was say as slow as 130 klicks!

What killed train travel was old unmaintained rail/rolling stock!

I've yet to see gridlocked commuter trains!

Road upkeep and maintainence is far more costly than properly maintained rail.

Rail travel is far safer and less costly than any other form of transport!?
Rhrosty.
Posted by Rhrosty, Sunday, 14 June 2015 1:58:29 PM
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Rhosty,

Yes, tickets on foreign airlines are a form of imports. But I see this as a relatively minor issue when much of the cost is imported fuel, and Aussie airlines are largely foreign owned and not very profitable. There would be costs, but I think a cabotage tax at the low rate I suggested is enough to make up for that. And, as I said, I would exclude our four busiest airports (Sydney, Melbourne, Brisbane and Perth) as demand there is already sufficiently high without cabotage.

Whether bonds are the most lucrative super fund option depends on many different factors, but there's no limit on the amount of money that could be sourced domestically.

Railways have to be designed so that a train won't fall off the track if it has to stop in an emergency. Tunnels are much much more expensive to build than surface track and aerodynamic resistance is much greater in tunnels than on the surface. So although they have obvious advantages, it's generally better not to build everything underground.

Railways can cope with hills (some in Switzerland manage 1 in 11 on adhesion alone) but it's not what they're best at, and trains usually have a much lower power to weight ratio than trucks. For new railways (for freight) it makes sense to avoid gradients of more than 1 in 50, and if possible keep it below 1 in 100 or even 1 in 200. This is much less important for high speed and suburban passenger railways.

Aerodynamics becomes more important the faster you go, and at high speeds even the small gap between containers is significant. But the situation is far worse for double stacked trains because those on the bottom are too low slung to go above the wheels, so where the wheels are there are big gaps between containers. But 130km/h is doable if the track is good, though competition with air would be very limited at that speed.
Posted by Aidan, Monday, 15 June 2015 2:34:26 AM
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(continued)
If the railway track is under a foot of water, it could mean the ground under it has washed away, so generally the trains would not proceed. If they did and it was, it would be a lot worse than a truck getting bogged.

I'm not quite sure what you'd count as "gridlocked commuter trains" but I think some of what I've seen in London comes pretty close to that description.

What killed train travel isn't the same in every place where train travel was killed, but it's generally not the quality of the track or rollingstock. As for the upkeep and maintenance cost of rail v road, it depends on what you start with and what the requirements are.
Posted by Aidan, Monday, 15 June 2015 2:35:34 AM
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Aussieboy

You recommend to “Get rid of shareholders (as)
every business that has shareholders has high prices and poor service this is what kill businesses”.

I disagree.

It is a lack of competition that results in high prices and a poor service. It isn’t “shareholders”.

Do you think the Apple iPad could have been invented in a non-competitive business environment?

Pericles

You mention “ the battle presently being waged between the "US Three" and the "Gulf Three". The core issue is the use of government money to underwrite airlines” and “the US government has on many occasions allowed its airlines significant protection from their creditors through Chapter 11, which the Gulf carriers see as a form of financial support. Which of course it literally is”.

You are spot on.
The hypocrisy is breathtaking.
Just like some chastise China for alleged “currency manipulation”, when the US Fed is flat out printing money hand over fist 24/7.
Posted by Jonathan J. Ariel, Monday, 15 June 2015 10:18:14 AM
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Posted by Goldahzdx, Monday, 15 June 2015 11:25:41 AM
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