QANTAS: Will it ever move operations to Perth’s Terminal 1?

Qantas and Perth Airport have long displayed simmering tensions over everything from Airport charges to consolidation of international operations. Well, according to the AFR today, it’s now getting so frustrating that the Deputy Premier of Western Australia, and Tourism Minister, Roger Cook, says it’s holding back development in Western Australia.

History

Let’s put aside the other disputes between Perth Airport and Qantas for the moment and concentrate on this issue of airport consolidation. Basically, Qantas wants to keep all its operations, domestic and International, in Terminal 3. In the other corner is Perth Airport, which has a masterplan agreed to by Qantas in 1919, consolidating all the airport’s international and domestic operations in one re-developed and expanded terminal – Terminal 1, requiring Qantas to move by 2025.

Consolidation works for the airport and government and commercial service providers. Centralising services like Border Force, customs, duty-free, and immigration, make for cheaper centralised services.

Current Situation

Perth Airport currently runs two international operations on either side of the runway – 15 minutes by road apart.

Qantas squeezed this arrangement out of the Airport in 2016 to operate a second international airport to facilitate direct Perth-London flights. The State Government contributed AU$14 million for the additional costs of border control, quarantine and immigration services. In return Qantas made a commitment to move all its operations to Terminal 1, joining all other airlines.

What’s ‘long term’?

Qantas made an ‘in-principle agreement’ to move all its operations – domestic and international to the new Terminal T1, or ‘Airport Central’ by the end of 2025. It currently sees the move as ‘in the long-term’, meaning later than 2025, unless someone, meaning taxpayers, is prepared to underwrite the move. And by ‘underwrite’, I mean completely pay for.

Now, of course, back in early 2020, while the ink on the agreement was still not dry, the pandemic intervened, delaying everything. Especially the airport economy, since Western Australia closed its borders to the rest of Australia for so long. Indeed during that time, Qantas re-routed its London flights via Darwin.

Is Qantas holding out?

Well, probably yes, but with some possibly good reasoning.

According to Qantas, due to the dispute and lack of an agreement favouring their terms, the airline has scrapped additional routes out of Perth, including Jakarta and Johannesburg in South Africa, which were scheduled to commence in November from T3 (Qantas’ current terminal). That dispute concerns who covers the cost and space needed for government services such as immigration, Border Force and biosecurity operations. With foot and mouth disease now being declared endemic to Indonesia, there are legitimate additional costs involved in biosecurity operations.

It’s a bit of a power play. Qantas wants an agreement settled to get a return on investment on the interim development of T3 to commence routes like Jakarta and Johannesburg. On the other hand, the Western Australian government wants an agreement ASAP, but without stumping up even more taxpayer dosh to give to Qantas to develop the new terminal.

Also, at the moment, Qantas controls its spending and investment in facilities at T3. When it moves to T1, it will have less control and the Airport greater control. Qantas will have to pay its split of the airport expenses and all the other airlines who will share the facility. That includes the round-the-clock provision of security, and Border Force type immigration services.

Qantas and Perth Airport have not always played well in the sandpit

Perth Airport sued Qantas over aeronautical fee payments a few years back – so the two businesses are not particularly good mates.

It’s also not like consolidating all operations into one terminal is a new idea. It’s been around since the 1980s, so Qantas can hardly plead that this has all been sprung on them without notice. The state government has already paid for a railway station at T1 which opened last year, so travellers can travel directly between the Perth CBD and T1 at the airport.

2PAXfly Takeout

Alan Joyce heading up Qantas, has made them a wily player when it comes to taxpayers covering the airline’s costs. It had state governments bid for its facilities and has gained various subsidies for establishing or resuming routes out of certain capital city airports.

I think that’s the real game here. Qantas wants someone else, most likely the Western Australian government, to hand over a large stash of taxpayer funds to cover the cost of establishing and moving to the new operations at T1.

The AFR is mainly behind a paywall, but if you can get to it, here is the link to the article.