Travellers bid farewell to cheap airfares
Travellers are about to realise how good they've had it flying on domestic routes over the past two years. After an era of super-cheap fares, they face some back-pocket pain from the competition regulator freeing up Virgin Australia to forge ahead with its bid for a controlling stake in Tiger Australia.
The decision to allow the removal of an independent third player in Tiger will mean the fast-paced growth in capacity in the domestic market will slow.
That in turn will reduce the need for the airlines to dump fares in order to fill seats on their planes.
The effective takeover of Tiger Australia removes the chance of irrational business decisions, such as launching new routes on which it had no chance of turning a profit.
But before passengers fire angry emails to the Australian Competition and Consumer Commission, it is important to consider the alternatives to its giving the green light to what will create a duopoly between two airline groups in Virgin-Tiger and Qantas-Jetstar.
Tiger has notched up losses of more than $216 million in less than six years. And its Singapore parent had made it clear it would pull out of Australia if the bid was blocked.
Competition tsar Rod Sims faced scoring an own goal. He could have knocked back Virgin's bid on the basis of a potential lessening in competition, only to find the third independent player pack its bags.
That would have been a worse outcome for the flying public.
While super-cheap fares on key routes might be nearing an end, it is important to bear in mind that the airlines cannot return to an era when gouging of travellers was the norm. A glut in capacity remains with Australia's domestic market growing this year by between 5 per cent and 7 per cent.
The question now is what will be the finer details of Virgin's plan to create a Qantas Mini-Me.
Virgin chief executive John Borghetti faces a big task because he has so many balls in the air.
Not only does he have to put Tiger on the path to profitability, he has to manage the takeover of West Australian airline Skywest and forge ahead with turning Virgin into an upmarket competitor to Qantas.
While the serial pest has been removed, the Tiger takeover will allow Borghetti to create a more credible competitor to the dominance of Qantas-Jetstar.
That can't be a bad thing for travellers.
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