New Directions in Australian Air Transport

he events of September 11 2001 and the Ansett collapse a few days later have had a major impact on the Australian air transport markets. In this paper, we examine the immediate and longer-term competitive outcomes associated with these developments, and review the policy issues that arise. We focus on the markets in which air services are provided domestically within Australia (‘domestic market’) and on any significant detrimental effects of recent events on the process of competition in the domestic market that may provide justification for increased regulation. This may take several forms, including imposition of airline specific regulation, and/or adjustments to general legislation guarding against anti-competitive activity — for instance, section 46 of the Trade Practices Act, which relates to the taking advantage of substantial market power. We also comment on the lack of desirability of industry-specific regulation. Our view of the case for adjustment to section 46 differs from that of the Australian Competition and Consumer Commission (ACCC). Developments in airport pricing and slot allocation, while also important, are beyond the scope of this paper. For a review of recent developments see Fels (2001) and for a discussion of policy options see Productivity Commission (2001a) as well as some discussion within Productivity Commission (1998).