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The ACCC has confirmed that domestic airfares have risen since Rex went into administration in July, with the reduced competition driving up prices.
In its latest Domestic Airline Competition report, the consumer and competition watchdog found average airfares went up 13.3 per cent across all major city routes from Rex’s collapse at the end of July to September, with Qantas Group and Virgin now flying 98 per cent of domestic passengers.
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Rex dropped its domestic jet operations after entering administration at the end of July, leaving only the Qantas Group-Virgin Australia duopoly to compete on domestic services. BITRE data in September showed that both “best discount” and “restricted economy” fares had increased since Rex’s exit from the domestic jet market.
The number of seats available on domestic flights between metropolitan cities has dropped by six per cent since July while passenger numbers stayed relatively stable, leading to fuller aircraft.
“Best discount” prices have soared on several former Rex domestic routes, with Melbourne–Adelaide up 95 per cent, Melbourne–Gold Coast up 70 per cent, and Canberra–Melbourne up 54 per cent, between July and October 2024.
“The recent spike in airfares corresponds with a less competitive domestic airline sector after Rex’s exit from 11 of the 23 services between metropolitan cities,” ACCC commissioner Anna Brakey said.
“While we also typically see a seasonal peak in air travel in September due to major sporting events and school holidays, there were additional pricing pressures this year.
“Passengers were no longer able to access the lower fares that Rex offered, and airline seating capacity decreased following Rex’s exit. This in turn has contributed to higher airfares.”
Around 90 per cent of domestic routes are now served only by two major airline groups, with the remainder served by just one – a dramatic shift from earlier in the year when Rex and Bonza were still operating jet services, at which time around half of domestic routes were served by at least three airline groups.
“The exit of Rex as a third competing airline group on services between metropolitan cities may have significant longer-term impacts on the domestic aviation sector,” Brakey said.
“The domestic airline industry has become even further concentrated, and it may be some time before a new airline emerges to compete on popular services between metropolitan cities, with normal barriers to entry and growth exacerbated by aircraft fleet supply chain issues and pilot and engineer shortages.”
“With less competition, there is less choice for consumers and less incentive for airlines to offer cheaper airfares and more reliable services.”
Data from the federal government’s competition taskforce in January showed that adding more competitors on a route can dramatically slash airfares.
Dr Andrew Leigh, Assistant Minister for Competition, pointed to figures from the taskforce showing that airfares average 39.6 cents per kilometre on routes with only one carrier, 28.2 cents on routes with two carriers, and 19.2 cents with three.
“In other words, the price per kilometre is halved when three competitors fly a route compared with the situation when there is only a single monopoly airline. With four or five competitors, the price drops further still,” he said.
“Aviation competition has been fundamental to connecting Australian cities to one another and connecting our country to the world. Still, many Australians suffer from a lack of competition.
“For example, for a resident of Darwin, it is often cheaper to fly from Darwin to Singapore than it is to fly from Darwin to Sydney – even though the international flight is longer than the domestic one.”
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says:I understand the needs for competition etc but in this country whenever another airline starts up, in a short space of time they go under and many people get burnt, some bigtime, we have two such examples on the go right now. When you consider the actual numbers of aircraft that the QFA group and VOZ are able to provide each day for the benefit of the flying public, antagonists inc. the ACC have to understand that a new player on the block with say four maybe six aircraft of equivalent character has virtually no chance of a continued existence within our aviation market unless the Govt. wishes to re-regulate the industry and that aint going to happen. Any future intender pursuing a business within our aviation sphere, unless they can come up with say 30 airframes and a guaranteed financial backing should not be granted an AOC. Regulatory bodies won’t like that idea but sometimes we have to protect people from themselves, be REALISTIC!