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Domestic airfares have fallen over the last 12 months since a peak in late 2022, but customers are still feeling the financial squeeze, the ACCC has said.
In its first domestic airline competition report since it resumed monitoring the sector, the ACCC said average revenue per passenger incorporating all fare types was 13.4 per cent lower in December 2023 than in December 2022, when adjusted for inflation.
“This was consistent with lower jet fuel prices, airlines slightly increasing seat capacity, and an easing of post-pandemic pent-up demand for travel. Average revenue per passenger was 1.4 per cent lower than pre-pandemic levels (December 2019),” the ACCC said.
“However, best discount economy airfares have not yet fallen to pre-pandemic levels. The general fall when adjusted for inflation may not reflect consumer experiences, who are still paying significantly more to fly in nominal terms than they did prior to the pandemic.”
The competition watchdog also noted that Australia for the first time has four different airline groups operating the same route, with Qantas Group, Virgin Australia, Rex and Bonza now all flying Melbourne to Gold Coast.
While about half of all domestic passengers in Australia last year flew on routes served by three or more competing airline groups, Cass-Gottlieb pointed out Rex and Bonza typically fly “far fewer” services on these routes compared to Qantas/Jetstar and Virgin.
“When more airline groups compete on a particular route, consumers benefit from lower fares,” she said.
“Qantas and Jetstar, however, continue to fly over 60 per cent of domestic passengers, representing a very high market concentration.”
The ACCC report backs up data from the federal government’s competition taskforce last month, which showed that adding more competitors on a route can dramatically slash airfares.
Dr Andrew Leigh, the Assistant Minister for Competition, pointed to figures from the taskforce showing that airfares average 39.6 cents per kilometre on routes with only one carrier, 28.2 cents on routes with two carriers, and 19.2 cents with three.
“In other words, the price per kilometre is halved when three competitors fly a route compared with the situation when there is only a single monopoly airline. With four or five competitors, the price drops further still,” he said.
“Aviation competition has been fundamental to connecting Australian cities to one another, and connecting our country to the world. 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.”
The government is undertaking a review of the sector ahead of the release of its Aviation White Paper next year, which will set policy direction towards 2050.
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says:Yes it can be cheaper to fly DRW SIN than DRW SYD just as in yesteryear you could fly SYD SIN via a stop in PER cheaper than SYD PER only. I appreciate that the ACCC has its heart in the right place but it’s brain needs some clarification. Their criticisms must be more definitive than broad spectrum and are they really suggesting that we have more domestic carriers in order to bring down prices. Air travel in Oz is recovering from the Covid era and soon it will stabilize and maybe, I hope not, but a green bottle will fall off the wall.