High airfare prices due to lack of competition, taskforce finds

You’re paying twice as much for flights as you should because airlines face little, if any, competition in Australia, a government inquiry has found.

Anyone who has travelled overseas can tell you the cost of flights in Australia is alarmingly high. Now, a federal government inquiry has found the major reason Aussies are charged so much is largely due to a lack of competition.

The Competition Taskforce has found that passengers pay just half the amount for a ticket on a route flown by three carriers as opposed to one. The research showed the competition doesn’t even have to be real – simply the “mere threat” of a competitor can be enough to get airfares trending down.

When only one carrier is flying a route, airfares were an average of 39.6 cents per kilometre. When two carriers compete, that drops to 28.2 cents and if there’s a third carrier it drops to 19.2 cents.

Presenting early findings, assistant minister for competition Dr Andrew Leigh told AAP it was clear that competition exerted “significant” downward pressure on airfares.

He said a lack of competition in Australia’s aviation industry is especially problematic in a country where flying between major cities is the only real practical option.

“Aviation competition has been fundamental to connecting Australian cities to one another, and connecting our country to the world,” he said. “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.

ACCC to be given greater powers

The Australian Competition and Consumer Commission (ACCC) is set to begin monitoring airfare prices again, after the government reinstated its investigative powers.

Gina Cass-Gottlieb, ACCC chair, says the regulator will now be able to effectively keep an eye on competition in the aviation industry.

“These are questions we are going to be investigating further now that we have the continued role of monitoring airline services,” she says.

In separate research conducted at the same time as the Competition Taskforce, the ACCC analysed corporate mergers in Australia that it said had led to “too much market concentration”, including in the airline industry.

It found mergers were mostly concentrated among larger firms and that roughly two-thirds occur without the consumer watchdog’s knowledge.

Under its voluntary notification system, the ACCC says it sees around 330 corporate mergers annually, but the actual number of mergers taking place each year was more like 1000 to 1500.

The ACCC has been pushing for mandatory notification and approval of upcoming mergers, and says some firms are clearly taking advantage of the voluntary system and offering up incomplete, incorrect and late information.

Would you support more competition in the airline industry? Do you believe flights are too costly? Let us know in the comments section below.

Also read: ‘Mandatory compensation’ would push fares up, Qantas claims