Future Owners of Qantas Need to Keep Regional Service

Despite fears to the contrary, regional air services are not in danger of disappearing, argues Bruce Teague

WHEN you talk about national institutions such as Qantas it's normal to see emotions run high. That's what's behind the reactions of several parliamentarians and, apparently, 94 per cent of Australians if Auspoll results are taken at face value. They all demand that Qantas's future owners continue to run all its regional services.

This is all smoke and mirrors stuff. It always has been, even when Qantas's predecessors, Ansett and TAA, dominated Australian skies. In fact, especially then.

Regional services are flights that run to smaller towns and cities using smaller than mainline aircraft. Qantas Airlink does that job in many areas today, as do several other airlines, notably the successful Rex (Regional Express) in the eastern states, Skywest in Western Australia and a mixture of charter operators and small commuters in Queensland.

The fear that hard-nosed bean counters might pull Qantas out of these routes is neither justified nor necessary. In fact, it's irrelevant.

First, for the big airlines, the principal benefit of smaller routes is that they feed traffic reasonably efficiently into the more lucrative mainline operation. The assumption is that the cost of attracting such passengers is not greatly different to the cost of getting hold of them in some other way.

Of course that efficiency may not always be present. It was over 30 years ago that Ansett's then part owner, Peter Abeles, told a Senate committee that the airline was losing more than $1 million a year running puddle-jumping Friendship turboprops up and down the Queensland coast. Losses across Bass Strait were comparable.

But the market never justified that action. The two airline policy and bloated fares on mainline routes did. Neither is possible today following the arrival of deregulation and the competitive effect of Virgin Blue and others.

Second, now and in the past, the withdrawal of a major airline is swiftly followed by the emergence of new operators, often running more appropriate services than the big guys did. East-West Airlines and Kendell Airlines did it for years and more recently Rex and others have followed suit.

Experience shows that local customers soon become attached to the higher frequency and more direct services that regional carriers usually supply. That's precisely why Qantas established its Airlink division, mostly by bringing small airlines under its own umbrella but keeping them quite separate from its mainline operation. Numerous feeder services to major airlines in the US run in a similar fashion, including to Continental Airlines, a major investment of Rick Schifter, one of APA's driving forces.

Such services are a specific and vital element of the air transport system everywhere.

Are there any losers? Well, seldom, but if there are, it's usually because demand was poor to start with and growth potential negligible. Even politicians usually realise these aren't viable, as do banks, post offices and service stations, so other options are put in place.

Perhaps of more concern is that smaller airlines are under increasing pressure from major airports -- and sometimes economic rationalists -- to give up access to prime time slots. Bigger planes move more people more efficiently, so the theory goes. Yet that theme ignores the fact that air transport is not a monolith but is by nature a network, a collection of flows to and from many centres with a great deal of interaction between flows.

Everyone has some right of access to that network, which is where the politicians should concentrate their attention.

So why do 94 per cent of Australians see this as a concern? It's hard to say, but such surveys can often encourage respondents to plump for the status quo rather than take a perceived risk by favouring the unknown. That especially applies when the effect of yes-no answers is unknown or not explained, as was the case here.

Ironically, the ACTU's keenness to force Qantas's new owners to maintain regional routes runs counter to the principles of a deregulated airline industry, something which a federal Labor government introduced in 1989, and which brought cheap fares and multiple choices to millions of ordinary Australians.

Bruce Teague is a former airline executive (Pan Am and East-West Airlines) and aviation consultant to the commonwealth, NSW and Northern Territory governments and various airlines.

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