Battle in the skies: Sounds Air chief lashes out at cheap Jetstar fares
Australian carrier Jetstar should be investigated for selling fares below cost, sparking a race to the bottom that threatens smaller operators, a regional airline boss says.
Sounds Air chief executive Andrew Crawford said since Jetstar started flying from Nelson Airport, in December 2015, the Marlborough airline had seen a significant drop in business in Nelson.
Crawford said Nelson Airport had been the second biggest market for Sounds Air. It was now the sixth, and the company was making $60,000 a month less than it was two years ago.
"Jetstar has come into this country and offered fares at ridiculous levels, I mean way below cost. They're offering fares that I believe the Commerce Commission should be putting a stop to," Crawford said.
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"It's absolutely decimated our market in Nelson to the point where we'll have to seriously consider if we can keep doing it ... it's a race to the bottom, and we're caught up in it."
Crawford made the comments at a public meeting organised by Kaikoura MP Stuart Smith, which took place in Blenheim on Tuesday evening.
It was illegal for a company to take advantage of market power under the Commerce Act, but for predatory, or below cost, pricing to be illegal companies had to meet a number of criteria.
A Jetstar spokesman said the Commerce Commission had never investigated the company for selling fares below cost. He did not say if the airline engaged in the practice.
"Aviation is a very competitive industry with airfares set based on market conditions. Jetstar is able to offer low fares because we keep our costs as low as possible," he said.
"Jetstar is proud to have brought low fares and choice to the Nelson community. Our services have been extremely popular and we've been able to boost the number of people travelling to and from the region, which is great for the local economy."
Jetstar was a wholly-owned subsidiary of the Qantas Group. The company's 2016 annual report showed, in the year to June, the Jetstar Group posted a net profit of A$452 million.
A Commerce Commission spokesman said the competition regulator had not received any complaints about Jetstar selling fares below cost, nor had it investigated the airline for the practice.
The spokesman said the commission occasionally investigated allegations of predatory pricing, which was covered by section 36 of the Commerce Act.
The commission defined predatory pricing as "where a business lowers its prices for a sustained period of time to drive a competitor or competitors our of the market".
"For such behaviour to be illegal, a business must be pricing below an appropriate measure of cost.
"The business must also have the ability to recover its losses by increasing its prices later, without having to worry about others entering the market."
- The Marlborough Express