The Chief Executive Officer (CEO) of Sydney Kingsford Smith Airport has called Australia's regulatory framework that manages slot allocations at the airport no longer fit for purpose, saying that it constrains productivity and efficiency and allows for misuse by incumbent airlines.
Sydney Airport, owned by Southern Cross Airports Corporation Holdings Limited (SCACH), an unlisted company jointly owned by institutional investors and several large superannuation funds, has long criticised the slot regime overseen by the Australian government agency, Airport Coordination Australia. Aside from a curfew and a cap of 80 movements per hour, the bête noire of Sydney Airport and its outgoing CEO Geoff Culbert, is the 80/20 rule, which mandates that airlines use 80% of their slot allocations but is unfussed about the remaining 20%. The airport alleges slot hoarding by their biggest customers, namely the Qantas Group and Virgin Australia (VA, Brisbane International), who accrue more slots than needed, schedule flights, then cancel the unwanted flights at short notice.
Culbert, who made an August 21 submission to the Australian government's Standing Committee on Economics, suggests the 80/20 rule gets changed to a 95/5 rule. "Rules allowing airlines to retain slots in perpetuity exacerbates capacity constraints by limiting the opportunities for new or expanding airlines to acquire slots needed to launch new services and compete," he wrote. "Airlines can exploit the scheme by acquiring and hoarding slots for strategic reasons, such as to prevent competitors' access to slots, resulting in inefficient slot use and further diminishing opportunities for increased competition."
Slot reform is just one of several recommendations Culbert made in his lengthy submission. He calls the current regulatory framework, namely the Sydney Airport Demand Management Act (1997) (Cth), "the most complex, unique, and restrictive set of regulations of any major airport globally." He says it "constrains productivity and efficiency at one of Australia's most important infrastructure assets and is no longer fit for purpose" and that the airport has been advocating for reform since 2017.
In a fiery appearance before a Senate Select Committee in Melbourne on August 28, Qantas Group CEO Alan Joyce refuted suggestions made by Australian Greens Senator Penny Allman Payne that it was hoarding slots in and out of Sydney Airport, which it had no intention of using.
"It's not a simple yes or no question to these things," said Joyce, who along with Jetstar Airways (JQ, Melbourne Tullamarine) CEO Stephanie Tully and Qantas Group Corporate Affairs boss Andrew McGinnes, faced 90 minutes of intense questioning by senators from across the political spectrum. Joyce says the high levels of cancellations on specific routes, such as Melbourne Tullamarine - Sydney and Canberra - Sydney are because they are high-frequency routes. If Qantas (QF, Sydney Kingsford Smith) needs to cancel a flight for operational or staffing reasons, or for reasons outside its control, such as the weather, it is preferable to do so on such a route where passengers can easily be reallocated onto other services rather than cancelling on a route that only sees only one or two flights a day.
Joyce said despite the 80 movements per hour limit at Sydney Airport, so far in calendar 2023, the hourly aircraft movements have averaged only 38. He said this was primarily due to weather and a chronic shortage of air traffic controllers. "Our biggest hub is Sydney, and if movements are restricted to 38, that means a lot of cancellations on average, and what we do, to minimize impact on customers, is to cancel on the highest frequency routes."
In addition to the Qantas Group airlines and Virgin Australia, over 50 other airlines operate scheduled flights into Australia's busiest passenger airport. Those carriers link the airport to 106 destinations in 31 countries. Culbert calls his proposals modest and pragmatic. He says the current regulatory framework was designed in a different era when the airport was less busy. He says the level of cancellations by his biggest customers goes beyond weather and airport-imposed operational requirements. "Such behaviour locks up part of the slot pool and can increase the difficulty for new entrants to compete against the entrenched dominant airlines, which can in turn impact on competition amongst airlines."
