‘Open skies’ agreements promise increased competition and lower airfares, but it’s not a magic bullet.
By David Flynn, September 22 2023 Share this article:
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In the wake of the federal government’s decision to block Qatar Airways from adding more flights to Sydney, Melbourne and Brisbane, there are increasing calls for Australia to embrace an ‘open skies’ approach to international air travel.
Open skies agreements are struck between two countries, and allow airlines from both countries to run as many flights as they wish to any airports they choose (provided that airport has sufficient capacity for those flights, of course).
That’s in stark contract to more restrictive bilateral agreements, which set limits on how many flights can be made – and into which cities.
The current case in point is of course the bilateral agreement between Australia and Qatar, which pegs flag-carrier Qatar Airways to 28 flights per week to and from Sydney, Melbourne, Brisbane or Perth, with an unlimited number of flights to other Australian cities.
Qatar Airways sought to increase its cap to allow an additional 21 flights per week, or the equivalent of three extra flights per day spread across Sydney, Melbourne and Brisbane.
The government’s contentious rejection of this led to the Select Committee on Commonwealth Bilateral Air Service Agreements, which is currently holding hearings before presenting a final report by October 9, 2023 - and there’s growing support for ‘open skies’ agreements to boost competition and bring down airfares.
Australia already maintains open skies agreements with nine countries – among them China, India, New Zealand, Singapore, Taiwan, the USA and the United Kingdom.
But open skies isn’t a magic wand that immediately fills up the arrivals and departures board at airports across the nation.
Despite open skies agreements with the US and UK, British Airways, American Airlines and Delta Air Lines fly only to Sydney.
And while Australia and Switzerland have inked an open skies agreement, we don’t see any flights from Swiss.
This reflects the commercial reality of open skies: while being a very laissez-faire approach, airlines still have to see a sufficiently strong market in terms of the number of passengers, as well as have the aircraft to serve that market.
None the less, moving away from bilateral agreements in favour of open skies has become a common theme at the government hearings.
“Even if we open the market entirely, it doesn’t mean we’ll necessarily be flooded with seats, but it would be fairer,” explains Australian Airports Association head James Goodwin.
“A more efficient outcome would be to allow foreign airlines to access, on an unlimited basis, Australia’s major airports through amendments to bilateral air services agreements,” says the government’s own economic advisory body, the Productivity Commission.
Flight Centre boss Graham Turner added his voice to the push, saying the government should forge open skies agreements with more other countries – and that where bilaterals were needed, the Australian Competition and Consumer Commission should be involved in the process, given it is also consulted when it comes to alliances between airlines and other issues impacting the travelling public.
“With unrestricted, ‘open skies’ air services agreements with only nine other markets, Australia is well off the pace of leading aviation markets,” notes a submission to the hearing by the Australian Chamber of Commerce and Industry.
The business group says the government has “effectively inflated the cost of airfares” by rejecting Qatar Airways’ application, which was also “a significant deterrent for tourists to travel to Australia.”
“For Australia as a market to be competitive relative to other destinations, airlines require longer-term certainty in accessing air rights on Australian routes” than can be delivered under bilateral regulations, says outgoing Sydney Airport CEO Geoff Culbert.
The Board of Airline Representatives Australia – which represents 40 carriers which fly to Australia – is understandably pro-open skies.
“Every new service, no matter whether on smaller aircraft from Australia’s closest neighbours in the Pacific Islands, to the largest aircraft operating from the furthest possible airports, bring additional visitors to Australia who spend money and generate economic activity.”
