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The Australian Competition and Consumer Commission (ACCC has) warned Qantas and Virgin that it will “remain vigilant” to the pair increasing fares after Rex pulled out of capital city routes.
The competition regulator’s latest report on the sector said that the smaller airline’s decision to shrink its network “may mean” prices would rise, despite Rex only holding a 5 per cent market share.
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“Consumers generally enjoy lower airfares where there is more competition on a route,” said ACCC commissioner Anna Brakey.
Rex collapsed into administration on 30 July and grounded its 737 services between capital cities, though it is still flying most of its regional services.
Bonza, however, was eventually liquidated after first suspending routes in April.
“The ACCC will continue to closely monitor domestic airfares on services between metropolitan cities following Rex’s withdrawal from this market, the ACCC’s latest domestic airline competition report states.
“The report shows improved conditions for consumers with declines in airfares, reduced cancellations and improved on-time rates for flights over the first half of 2024.
“However, the ACCC cautions that consumers may miss out on the benefits of a more competitive domestic airline market if Rex is unable to recommence its services between metropolitan cities.
“Rex continues to provide important connectivity to communities across 33 regional and remote routes and the government has announced that it will guarantee regional flight bookings for Rex customers throughout the voluntary administration process.
“The collapse of Bonza and withdrawal of Rex from routes between metropolitan cities means that, as of July 2024, no domestic route has more than two competing airline groups.
“In June 2024, Rex had accounted for about 5 per cent of domestic passengers and flew 44 routes across 56 destinations in Australia.
“While Bonza and Rex provided relatively limited capacity on these metropolitan competing routes, the exit of both airlines on these routes may mean that consumers face higher airfares and reduced choice for domestic travel.”
The ACCC also noted that, between November 2023 and April 2024, for the first time in Australia, there was a route with four competing airline groups (Melbourne–Gold Coast).
“In June 2024, routes serviced by three airline groups represented 50 per cent of domestic passengers.
“Compared to their 2019 levels, airfares on routes with increased competition have been lower than the broader domestic network in every month since February 2023, indicating that increased competition has resulted in lower airfares for consumers.”
The ACCC’s warning comes after the watchdog’s former chair, Rod Sims, condemned what he calls a “failure of public policy” that led to the downfall of Rex.
Speaking on ABC Radio National, Sims insisted that the Australian aviation market can sustain more competition but said this is being held back by poor policy settings around slot management at Sydney Airport.
The federal government this year decided against changing the “80/20 rule”, which allows airlines to keep a take-off slot indefinitely provided they operate it at least 80 per cent of the time.
“We certainly can have more than two airlines on these capital cities routes, certainly on the Melbourne–Sydney route. But public policy is simply stopping that happening, and I don’t know why,” Sims said.
“All evidence shows that when you have three airlines flying a route, the prices are much lower. It’s just unquestionable that that’s the case. So why the government doesn’t change the policy levers to bring that about, I really do not understand.”
