The reborn Virgin Australia has knocked Qantas’ post-COVID domestic market share down from 74 per cent in December to 69 per cent in March.
The decrease, revealed in the latest ACCC report monitoring network expansion, came alongside Virgin increasing its share from 24 per cent to 28 per cent, with Rex holding steady at 2 per cent.
Today’s figures are hugely significant because Qantas chief executive Alan Joyce has repeatedly insisted his business would take at least 70 per cent of the domestic industry when the pandemic recedes.
With Virgin also recently expanding its fleet and staffing levels, Joyce’s prediction now looks uncertain.
Today’s ACCC report is the fourth into the aviation industry in response to a request by Treasurer Josh Frydenburg in June last year.
It shows that 18 per cent of Australian domestic passengers flew on routes where there was a choice of three airline groups, compared with the pre-pandemic figure of 1.5 per cent. That number is expected to have increased since March due to Rex’s expansion.
“Passengers flying Melbourne–Gold Coast, Melbourne–Adelaide and Sydney–Gold Coast now have a choice of four airlines, as Qantas, Jetstar, Virgin and Rex are all operating on the routes,” ACCC chair Rod Sims said.
“The impact of increased competition can be seen on all of Rex’s new intercity routes, including Sydney–Melbourne where airfares fell to their lowest level in a decade following Rex’s entry.”
The investigation also revealed total passenger numbers in March 2021 were 55 per cent of pre-pandemic numbers, up from 41 per cent in December 2020.
“Prior to the recent Victorian outbreaks, the domestic airline industry had experienced relatively fewer and less significant disruptions for a number of months, and the combination of cheaper airfares and growing consumer confidence to travel interstate was critical to the recovery,” Sims said.
Coincidently, Qantas on Thursday announced it would increase its capacity to 107 per cent of pre-COVID levels and Jetstar to 120 per cent.
The move has been made possible because the airline group negotiated a new deal to utilise up to 18 of Alliance’s E190s, up from an initial 14. This then allowed it to shift its larger 737s to other domestic routes.
Finally, Jetstar will temporarily redeploy three A320s from Jetstar Asia in Singapore to increase its capacity in Australia, alongside the six A320s already on loan from Jetstar Japan.
Qantas Group chief executive Alan Joyce said the new strategy was to “think creatively” about how the business uses its fleet.
“Victoria represents about 20 per cent of our total network and with restrictions in Melbourne easing and as borders start to reopen, we expect to see a quick rebound in travel demand just as we have in other cities when lockdowns ended,” said Joyce. “Our forward bookings certainly suggest that’s going to be the case.”
The news marks the latest development in the apparent second “capacity wars”, as airlines look to expand their networks in a world with fewer border restrictions but no international travel.
In May, Virgin said it would hire an extra 250 staff, including pilots, ground staff and baggage handlers, in addition to the 150 new cabin crew roles unveiled last month.
The airline made the announcement alongside revealing plans to launch five new services and significantly increase frequency across its network, including by 30 per cent on the ‘Golden Triangle’.
Meanwhile, Rex said it would rival Virgin and Qantas to fly Melbourne–Canberra from 10 June using one of its new 737s. The move has been delayed due to Victoria’s current lockdown.
It follows last month’s launch of the Sydney-Canberra service, where Rex now operates seven return flights each weekday, alongside flights to the Gold Coast and Adelaide, as well as Sydney and Melbourne.
The new “capacity wars” have seen Rex and Qantas engage in a war of words, which has included Joyce mocking Rex’s “empty aircraft” and Rex deputy chairman John Sharp branding his rival “technically insolvent”.