Qantas won’t proceed with its plans to launch a non-stop flight to Paris, along the lines of its successful Perth-London service, until a simmering legal dispute between the airline and Perth Airport is resolved, according to Qantas Group chief executive Alan Joyce.
Addressing a ‘Leadership Matters’ breakfast hosted by The West Australian at Perth’s Crown Ballroom, Joyce said Qantas would not buy the extra planes needed to mount the non-stop Paris service until a pricing issue was resolved.
This dispute has been going on for some time, with Qantas saying Perth Airport is charging far too much. For its part, the airport says it has reached agreement with 23 other airlines and Qantas is the holdout.
Joyce said the Perth-London service has been a resounding success. Load factor has hit 94%, 14 points above average. Reliability stands at 99.5% with just four flights cancelled, all because of technical issues.
On the payment front, Perth Airport is in a legal stoush with the airline, alleging that Qantas has unilaterally decided to short-pay its invoices by about 40%. The airport issued a writ in December for AUD 11.3 million to recover unpaid charges.
“The amount now outstanding (July-October) totals approximately AUD 11.3 million which constitutes a material amount of revenue and is not sustainable,” the airport alleges in a writ filed in the WA Supreme Court and cited by the West Australian newspaper in December as alleging a shortfall of AUD 11,297,902.
Perth International Airport
The paper quoted a statement by Perth Airport saying that for “more than 18 months it has been offering a new Aeronautical Services Agreement to Qantas which would have delivered the airline a significant price reduction.
“All other airlines which use Perth Airport had reached agreement with Perth Airport on charges for aeronautical services, effective 1 July 2018,” the airport stated.
In Perth this week, however, Joyce made clear that: “We do have to approve new aircraft to do it [the Perth-Paris route] and unfortunately while we have a legal case going on with the airport… I don’t think the shareholders would be too happy with us ordering a number of aircraft… when we don’t have certainty about the future.”
Joyce made clear that Qantas considered Australian airports generally were charging airlines, not just Qantas, too much.
He said airfares had fallen 45% over the past decade while airport charges had risen 25%.
In January, chief executive Qantas Domestic, Andrew David, used a landlord and tenant analogy to push the Qantas viewpoint.
“Imagine you were signing a new, seven-year lease for your house, but your landlord told you that you would have to pay 20 years’ worth of rent.
“You can’t move anywhere else, because that same landlord owns every house in town. It’s a monopoly.
Qantas B787 Dreamliner
“If you don’t agree to the new terms, they’ll send you invoices anyway – and if you don’t pay up, they’ll sue.
“That’s the situation we find ourselves in with Perth Airport at the moment.”
David said that Perth Airport, as a monopoly, had no competition and could charge what it liked.
“Ultimately, the travelling public end up footing the bill,” David said.
“For every AUD 100 they make in revenue from passenger charges, car parking or retail, Perth Airport makes more than AUD 50 in profit. Most businesses can only dream of margins like that.”
The airline industry (and travel in general) is known for its slim profit margins.
How the WA Supreme Court will view the matter is anyone’s guess – unless the two parties come to an agreement before it reaches that stage.
Written by Peter Needham
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