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A recent study has pointed to new research suggesting that Virgin Australia is slashing domestic fares to compete with Australia’s budget airline, Jetstar, yet is still appealing to premium customers through competition with Qantas.
The study, led by the University of South Australia, found that across the four busiest domestic routes (Sydney–Melbourne, Sydney–Brisbane, Sydney–Gold Coast and Brisbane–Melbourne), Qantas fares were highest, Jetstar lowest, and Virgin placed somewhere in the middle, depending on time of booking.
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“Our research found that Virgin adopts a selective pricing response to Jetstar. For travellers booking early (28 to 60 days in advance), Virgin’s fares tend to shift closer to Jetstar’s,” lead researcher Professor Shane Zhang said.
The study found that when it comes to short booking windows (1 to 21 days), Virgin aligns its pricing with Qantas by focusing on points, premium, and loyalty schemes.
Zhang says that this is a move done to remain competitive from a business perspective, yet stay a viable and preferred option to a wide range of customers.
“Virgin is walking a fine line between cost and service differentiation. It follows Jetstar just enough to remain competitive with budget-conscious travellers, but not so much that it dilutes the brand with higher-yield business customers,” he said.
The study suggests that this in-between competitive position is largely a response to the brand’s restructure in 2020, which saw Virgin’s low-cost subsidiary, Tiger, being closed down, making Virgin a “formidable rival” in Australia’s skies.
The study highlights that due to the small, yet competitive market, with Jetstar at 33 per cent of market share, Qantas at 65 per cent, and Virgin at approximately one third, the potential anti-competitive behaviour is present.
“While not illegal, tacit collusion in Australia’s duopoly market is bad news for travellers, leading to inflated late-booking fares,” Zhang said.
“It’s important that regulators monitor steep, last-minute fare hikes for signs of anti-competitive behaviour and misuse of market power.”
Researchers suggest that this emerging pattern of airline adaptation means that Jetstar should be granted more autonomy from its parent company, Qantas, for it to directly compete with Virgin in the domestic airspace.
“We’re seeing the start of a more complex competition pattern,” Zhang said.
“Hybrid carriers are no longer just adapting to low-cost competition; they’re reshaping how fares are structured in the entire market.”
