You are not imagining it, domestic flights around Australia are steadily increasing.
According to the Australian Competition and Consumer Commission (ACCC), increasing concentration in the market following Rex’s announcement of voluntary administration and consequent withdrawal from several routes has made the industry “less competitive”.
“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.”
Revenue increasing
Since July 2024, the number of seats on services between metropolitan cities fell by 6 per cent, while the number of domestic passengers travelling on these routes remained relatively stable, which led to fuller flights.
Real average revenue per passenger on these routes increased by 13.3 per cent to September 2024.
The ACCC report, Domestic Airline Competition in Australia, says concentration in the market will affect consumers.
“Since Bonza went into liquidation and Rex withdrew from major domestic routes, there is no longer any route on Australia’s domestic network serviced by more than 2 major airline groups. Qantas Group and Virgin Australia have since serviced 98 per cent of domestic passengers,” the report stated.
“It may be some time before a new airline emerges as a serious third competitor, which is likely to result in higher airfares and reduced choice for consumers.”
Rewarding financial year
The report noted that the two major airlines had a rewarding financial year as a result.
Qantas Group reported strong performance in 2023–24, with underlying earnings before interest and tax (EBIT) of $2.28 billion across the business. Of this, the domestic operations of Qantas and Jetstar contributed $1.06 billion and $298 million respectively. Virgin Australia reported an underlying EBIT of $519 million, with its airline business contributing $392 million.
However, this did not translate to improved service. The ACCC report found the industry average cancellation rate worsened from 2.1 per cent in May 2024 to 3 per cent in July. It has since improved to 2 per cent in September. The industry on-time arrival rate improved slightly from 71.1 per cent in July to 75.5 per cent in September.
For the September figures, no surprise that Qantas was by far the worst offender, with a 2.8 per cent cancellation rate, followed by Virgin (1.4 per cent), Jetstar (1.3 per cent) and Rex (1.2 per cent).
Bail out for Rex
The federal government announced this week that it will give Rex $80 million to prop up the struggling airline. Transport minister Catherine King and workplace minister Murray Watt announced on Tuesday that the government would provide up to $80 million and grant early access to entitlements for Rex’s former employees.
In a joint statement the ministers said the money will support providing critical services for regional communities, with Rex’s administrators intending to apply to the Federal Court of Australia to extend the voluntary administration to 30 June 2025. Rex flies to many regional airports not serviced by the major airlines.
Slot hoarding
The major airlines are also under scrutiny for slot hoarding, which is the practice of ‘booking’ departure times only to not use them, preventing other airlines from benefitting from time at the airport.
It certainly doesn’t look good that the government outsources the management of the slots at Sydney airport to a company that’s majority-owned by Qantas and Virgin, according to The Conversation.
And to make it even worse the the Senate Rural, Regional Affairs and Transport Legislation Committee hearing was recently told that Sydney Airport’s compliance committee, which oversaw slot allocations, had not met for five years.
Have you noticed flights becoming more expensive? Why not share your experience in the comments section below?
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