Virgin Australia carried more passengers than rivals Qantas, Jetstar and Rex in January, as Rex’s expansion into domestic routes drives increasing competition.
According to the Australian Competition and Consumer Commission’s latest Airline Competition in Australia report, released on Tuesday, Virgin claimed 34 per cent of the passenger market in January, up from 33 per cent in October 2021.
The figure surpasses Virgin’s long-held target since exiting administration in November 2020 to achieve and hold onto 33 per cent of domestic market share. Virgin boasted just 22 per cent share in November 2020.
Qantas and Jetstar each claimed 31 per cent of the month’s domestic passenger market share, sending the Qantas Group’s collective share to just 62 per cent, well below the Group’s target of 70 per cent.
The results mean that throughout January, Qantas’ budget subsidiary Jetstar also increased its market share, up from 17 per cent in October 2021, when it was still heavily impacted by COVID lockdowns.
Meanwhile, Qantas mainline has therefore taken a hit to its market share, falling from 46 per cent in October 2021 to 31 per cent in January 2022.
Rex’s share has remained steady since October 2021 at 4 per cent.
According to the Australian Competition and Consumer Commission chair Rod Sims, the addition of Rex into the domestic airline market has driven down prices for consumers, and driven competition between incumbent players.
“The Australian domestic airline industry has predominantly been a duopoly since deregulation 30 years ago, but we now have three airline groups competing on some of Australia’s busiest routes,” Sims said.
“We’ve seen significant price reductions on these routes due to increased competition,” he said.
“Each airline is working hard to win over consumers and as they continue fighting for market share, we can expect competitive airfares, improved connectivity, and better products and services.”
Overall, domestic carriers saw 2.5 million passengers in January 2022, a decrease of around 50 per cent compared to pre-COVID levels.
The ACCC also noted the announcement of start-up budget carrier Bonza’s initial route offering, and again reiterated its commitment to ensuring new entrants are allowed to thrive.
“We will be watching how the existing airlines respond to this new competition, and we will keep an eye out for any anti-competitive capacity increases or pricing practices,” Sims said.
“We will pay particularly close attention to incumbent airlines entering any of the new routes announced by Bonza.”
Notably, Bonza’s initial route network does not fly to or from Sydney, despite the carrier’s attempts to come to an arrangement with the airport.
“We understand that Sydney Airport’s proposal did not meet Bonza’s requirements, and access to take-off and landing slots presented a further impediment to entry,” Sims said.
“Policy settings need to be improved to create a more fertile environment for new and expanding airlines, and we note that the government is currently reviewing its rules for how slots at Sydney Airport are allocated to airlines.”
“The arrangements whereby airlines can retain historic precedence to slots must not be used to protect incumbent airlines from competition,” Sims said.
It comes after Bonza CEO Tim Jordan told the Australian Aviation Podcast that his airline is prepared to walk away from airports that don’t come to the negotiating table on fees.
He said airport charges are the “single, largest cost” for airlines, and airports that want to benefit from Bonza’s low-cost leisure customers will need to be competitive.
“Really low fares don’t happen under the off-the-shelf pricing of airports, and we can’t work with that level of pricing for our business model.
“If there’s a capital city with an airport that’s going to say, ‘Well, our pricing is our pricing, bad luck, take it or leave it’, I actually think that those communities will be pretty unhappy with those airports.
“Because they’re going to miss out on what will be price-stimulated travel. And that’s really great for tourism, and markets into and out of those particular cities.”
Jordan said if airports won’t drop to a competitive level, that “it would be wrong” for Bonza to operate there, “knowing that we’re going to fail”.
“If we can’t get the necessary pricing model, we’d rather not do it. We can deploy it elsewhere. We’re not short of choices.”