Airports scrutinise Virgin Australia’s proposed treaty

Collective bargaining proposal scorned by airport operators

Virgin Australia has been lambasted by domestic airports for a proposed collective bargaining agreement it is seeking to adopt in the face of the coronavirus pandemic.

This week the Australian airline entered voluntary administration with the goal to emerge as a “leaner, stronger and fitter” carrier, CEO and Managing Director Paul Scurrah said.

His comments on Tuesday [21 April 2020] came after an application was submitted to the ACCC on 9 April seeking “urgent interim and final authorisation” to allow Virgin Australia to cooperate with other operators on domestic and international short-haul trans-Tasman and Pacific passenger and cargo flights during the COVID-19 crisis.

The application excludes Virgin’s government-funded domestic services.

“While most air travel has ceased, we still need to be able to move Australians around the country and region for essential travel purposes… Balancing the provision of these essential services, against the cessation of most revenue-generating services, necessitates a careful and efficient allocation of resources,” Scurrah said in an opening letter accompanying Virgin’s submission to the Australian Competition and Consumer Commission.

“This is important in the interests of passengers today, and ensuring that our airlines survive to compete tomorrow,” Scurrah added.

In brief, Virgin Australia’s short-term response to the coronavirus pandemic travel restrictions on domestic and overseas travel seeks to allow the carrier to, among other conduct, jointly coordinate routes, scheduling, splitting or sharing revenue and discuss/arrange negotiations (including collective bargaining) with airports in regards to infrastructure use and fee relief.

The other “operators” are namely Qantas Group (including Jetstar), Regional Express, Alliance Airlines, Cobham and Air North. Without approval from the ACCC, the proposed cooperation between airlines could be deemed cartel conduct and contravene sections of the Competition and Consumer Act.

VA has sought a 14-month term for its flagged aviation cooperation, through to 30 June 2021.

“Virgin Australia views this as a temporary measure necessary to enable airlines to get through this crisis and its immediate aftermath of rebuilding services,” the application states.

Airports react to proposed collective bargaining

However, the proposed duration of the application and the collective bargaining conduct has been met with criticism by the Australian Airports Association and its members.

The Australian Airports Association told the competition watchdog the time period for authorisation is “inappropriately long” given its purpose is to assist “short-term issues”. The uncertainty of the duration of the COVID-19 crisis must also be taken into consideration, the group said.

“Accordingly, a time period to 30 June 2020 is appropriate, proportionate and justified in striking the right balance between minimising sanctioned cartel conduct and tailoring a proportionate response to a significant decline in demand,” the AAA said.

While supportive of most of the aspects of the conduct, the collective bargaining facet of Virgin Australia’s application was scorned by the organisation.

In its 21-page submission to the ACCC, the Australian Airports Association said providing an interim green light for the collective bargaining element, in the absence of any stand-alone arguments, is “uncertain, broad, unjustified, opportunistic and deleterious to competition with no countervailing material public benefit”.

Melbourne Airport also strongly opposed the collective bargaining proposal, saying the application “appears to be a poorly constructed attempt to reintroduce such anti-competitive clauses by stealth”.

“In our view, even the interim authorisation of this element of the application is entirely unnecessary, is likely to cause detriment and is unlikely to create any discernible community benefit. As such, we urge the ACCC to reject this element of the application,” voiced Jai McDermott, Executive Corporate and Public Affairs, Melbourne Airport.

McDermott slammed the 14-month term of the application, saying the period seems “unnecessarily long” and recommended a period until September 2020.

Image credit: Melbourne Airport | Facebook

Adelaide Airport Managing Director Mark Young rejected the application for its airline collective negotiations, saying the airport was “uncomfortable” providing full transparency on deals made with each airline.

“For major airlines, the deals are unique and reflect their business models, product, priorities and growth strategies at our port. Competitor airlines would likely have more to lose than airports on their disclosure,” Young told the ACCC.

Young, too, backed the call for a shorter period for the proposed airline coordination, for instance until September 2020 with a review period in advance of that date.

Cairns and Mackay Airport owner North Queensland Airport (NQA) says Virgin’s claimed benefits are “unlikely to arise and theoretical and at best speculative”.

“The Applicant has not put forward any basis which rises to an unambiguous benefit to NQA from collectively negotiating with Virgin and its competitors,” North Queensland Airports CEO Norris Carter said.

Submissions for interim authorisation closed yesterday [22 April 2020] and the ACCC advises it will begin the consultation of the application for authorisation shortly.

Lead image credit: Virgin Australia (supplied)

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