Domestic air travelers are facing higher Australian domestic airfares and fewer choices following Rex Airlines exit from competition on metropolitan routes. This is according to the latest ACCC Domestic Airline Competition report. This following the demise of new low-cost start-up Bonza earlier this year.
The latest findings paint a concerning picture of decreasing competition in Australia’s aviation sector, says the Australian consumer watchdog.
Air Fare Increases July to September 2024
After failing to break into the domestic air travel market, Rex suspended its major city operations on July 31.
The impact was immediate and substantial, with average airfares surging by 13.3% between July and September 2024. This significant price hike reflects the broader implications of reduced competition in the domestic aviation market.
“We’re witnessing a direct correlation between decreased competition and higher fares,” explains ACCC Commissioner Anna Brakey.
“Rex’s withdrawal from 11 major city routes has fundamentally altered the market dynamics. September typically experiences higher fares due to major sporting events and school holidays.”
“This year’s increase was exacerbated by the loss of Rex’s competitive pricing and reduced overall seating capacity.”
The numbers tell a compelling story. Seat capacity on metropolitan routes has dropped by 6% since July 2024, while passenger numbers remained relatively stable. This mismatch has led to fuller flights and increased pricing power for the remaining carriers.
A Change in Competitive Landscape
Perhaps most concerning is the dramatic shift in market structure. In early 2024, nearly half of all passengers enjoyed the benefits of competition between three or four airline groups.
The current landscape is starkly different, with no domestic route serviced by more than two major airline groups. The Qantas Group and Virgin Australia now dominate the market, collectively serving 98% of domestic passengers.
“This consolidation raises serious long-term concerns,” Brakey warns. “The aviation sector has become increasingly concentrated, and various factors make it unlikely we’ll see new competitors emerge soon.”
“Current industry challenges, including aircraft supply chain issues and shortages of pilots and engineers, create significant barriers for potential new entrants.”
Impact on Major Capital City Routes
The impact on specific routes has been particularly severe. Passengers flying from Adelaide to Melbourne now face fares 95% higher, reaching $296.
The Melbourne to Gold Coast route has seen a 70% increase to $432, while Canberra to Melbourne travelers must pay 54% more, with fares hitting $298.
Interestingly, these price increases have occurred despite a 41% drop in jet fuel prices over the 12 months to September 2024.
While average revenue per passenger increased slightly in nominal terms (2.6%), it remained effectively flat in real terms (-0.2%). This contrasts sharply with international travel, where economy airfares from Australia actually decreased by 5-10% year-over-year.
Airline Performance Stats
Rex continues to operate regional routes under voluntary administration, with government guarantees protecting regional flight bookings.
However, service reliability across the industry has fluctuated throughout 2024. The industry’s cancellation rate peaked at 3.0% in July before improving to 2.0% in September.
Individual airline performance varied significantly. Rex maintained the lowest cancellation rate at 1.2% in September 2024, followed closely by Jetstar (1.3%) and Virgin Australia (1.4%). Qantas recorded the highest cancellation rate among major carriers at 2.8%.
There has been some positive movement in on-time performance, which improved from 71.1% in July to 75.5% in September 2024.
Commissioner Brakey emphasizes that punctuality remains a crucial factor for travelers and expects airlines to continue focusing on improvement.
Consumers are now left hoping for policy interventions that might help restore competition and more favorable pricing. Until then, domestic air travelers face the prospect of higher Australian domestic airfares and fewer choices in an increasingly consolidated market.
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