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Domestic airline capacity has not yet recovered to pre-COVID-19 levels despite surging demand, fuelling higher prices, the ACCC has said.
In its latest Domestic Airline Competition report, the consumer and competition watchdog found total seats flown by major domestic airlines in June 2025 were 2.8 per cent lower than the same period in 2019, despite passenger numbers now tracking similarly to pre-pandemic figures.
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The Australian Competition and Consumer Commission (ACCC) attributed this largely to the loss of Virgin Australia’s former low-cost arm, Tigerair, which was shuttered when the carrier went into voluntary administration in 2020.
“The withdrawal of Tigerair in 2020 significantly reduced the capacity for low-cost travel from the domestic market,” ACCC commissioner Anna Brakey said.
“Since then, the lack of growth in seat capacity to meet rising demand has likely meant consumers are paying more than they would have in a more competitive, better-supplied market.”
According to the report, the demise of Tigerair may have cost Australia around 398,000 monthly seats – the number the airline flew in June 2019.
“In addition, Rex has reduced seat capacity by 21.4 per cent (54,000 seats) since June 2019,” the ACCC said.
“However, only some of the capacity vacated by Tigerair has been picked up by other airlines since. The remaining low-cost carrier Jetstar has added the most capacity, increasing seats by 15.7 per cent (or 193,000 seats) from June 2019 to June 2025.
“Virgin Australia increased seat capacity by 3.6 per cent (64,000 seats) over this period, and Qantas increased capacity by 1.0 per cent (24,000 seats).”
Average airfares across all types in June 2025 were slightly higher than last year despite fuel prices dropping by 12.3 per cent in the same period.
“After several years of delays in the delivery of aircraft and global supply chain issues, both the Qantas Group and Virgin Australia are expected to receive new aircraft in the second half of 2025,” the ACCC said.
“The Qantas Group’s fleet will also increase following its decision to close Jetstar Asia, resulting in the redeployment of 13 aircraft to Australian and New Zealand routes.
“Airlines have indicated that the new and redeployed aircraft will be used to replace leased and older aircraft in the first instance, before considering significant expansions in capacity.”
Data from the federal government’s competition taskforce last year showed that adding more competitors on a route can dramatically slash airfares.
Dr Andrew Leigh, the 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.
The domestic airline sector last year returned to an effective duopoly with the collapse of Bonza and the end of Rex’s capital city 737-800 services.
