Licence call to cut airfares in regional WA
The State Government needs to consider including provisions in airline licences to ensure reasonable fares can be offered to regional residents, according to a retired industry insider.
Former corporate travel manager Claude Scivolo gave a rare insight into the inner workings of relationships between companies and airlines to the State Government’s inquiry into regional airfares this month.
Mr Scivolo said procurement negotiators and logistics departments of big resources companies were experts at cutting deals with carriers.
“They will know exactly the number of people due to go up on any particular day, so they can plan well out the number of movements that they are going to have per project or per expansion project or whatever it might be,” he said.
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“They go direct to the airline and say, ‘over a period of the next five or seven or eight years, we’ve got X number of movements Perth-Karratha, Perth-Port Hedland, Perth, whatever it might be. If you want the contract, what are you prepared to offer?’
“There is probably no way one airline is going to carry 100 per cent, so they will always contract the other airline for a smaller percentage, maybe for a slightly different fare level.”
When questioned on the impact this practice had on remaining seats, Mr Scivolo said it was likely once airlines covered costs through commercial contracts, any extra seats sold represented “pure profit” to the carrier.
“Where the ordinary punter would go and have a look online and see it is going to cost $1073 to do whatever they want to do, the mining company is paying anything between 30 and 55 per cent less than that, depending on who it is, how hard they have negotiated and what the terms of the contract are,” he said.
“You are talking about companies that spend $40 million or $50 million a year on point-to-point air travel. They are obviously going to get looked after before the normal person.”
Department of Transport acting managing director Steve Beyer said a discussion was needed about what information the department could get from airlines and what resources were required to process that information.
“We are at a point where we will need to advise the Government and the Government will need to make a decision about whether or not we want to get into the space of greater scrutiny of price as distinct from leaping to getting into the game of price regulation with greater scrutiny.”
“If we want to go back and say, “sorry, but we are changing the rules. We are going to start putting conditions on those licences to seek information A, B and C”, then we have got to say to the government, focus on what information do we want to get and what are the implications for us in terms of trying to process that information.”
DoT aviation director Peter Ryan said the State Government could impose conditions on licenses tomorrow if it wished.
“It is available to the Government to add conditions on licences when it chooses to,” he said.
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