Koala and Zinc will boost competition, says ACCC

“Australia’s domestic airline sector remains highly concentrated, with the Qantas Group and Virgin Australia operating 98.5 per cent of passenger flights,” said ACCC Commissioner Anna Brakey.

“We welcome credible interest from potential new entrants and the positive impact this could have for consumers.

“More competition can deliver better outcomes for passengers through greater choice, new routes and downward pressure on fares. We will continue to track developments in the market closely.”

The news comes after both Qantas Group and Virgin increased airfares due to higher fuel costs after Iran effectively closed the Strait of Hormuz, which sees around 20 per cent of global oil traffic, earlier this year. The major carriers have also cut capacity on domestic services.

“As indicated by revised forecasts published in April 2026, both major airline groups are expecting to recover at least some of the additional costs in jet fuel by raising fares and reducing capacity. This has meant higher prices and less choice for some consumers,” the ACCC said.

According to the ACCC, jet fuel prices were “over 40 per cent higher in early June 2026 compared to mid-February 2026”, which increased cost pressures sector-wide. Virgin has increased fares by around five per cent, while Qantas has not disclosed the size of its increase.

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“Higher jet fuel prices are driving significant changes in how airlines operate, including reducing or suspending services and increasing fares on some routes,” said Brakey.

“We’ve seen services paused or withdrawn on routes such as Adelaide to Mount Gambier, Alice Springs to Brisbane and Darwin to the Gold Coast, meaning fewer travel options for some communities.”

The Australian Airports Association (AAA) said the report highlights the need for support to aviation, with CEO Simon Westaway saying international conflict is “having a substantial impact on aviation, with elevated jet fuel prices already influencing airline decisions and placing pressure on the broader sector”.

“We’ve seen disruption through major Middle East hubs lead more Australian travellers to look to the Asia-Pacific for their trips, reinforcing the importance of diverse and resilient international networks,” he said.

“Regional routes are often among the first exposed to rising costs and capacity changes, so maintaining a strong focus on regional connectivity must remain a priority.

“The announced agreement between Iran and the United States is a welcome development, and we understand more needs to progress before we see pressure ease on fuel markets and global aviation.

“We also welcome the hard work of the Australian Government to maintain fuel security, which has helped keep Australian aviation moving these past few months. The global fuel crunch has highlighted the need to strengthen domestic fuel resilience, including through the development of a Sustainable Aviation Fuel industry.”

Demand remained steady, the watchdog noted, with April 2026 the busiest April for domestic travel since 2019.

Domestic carriers saw around five million passengers in March and April, with seat capacity up 1.9 per cent year-on-year for April, though average revenue per passenger fell by 3.4 per cent year-on-year, reflecting tickets purchased before the fare increases.

“Demand has remained resilient over recent months, supported by holiday travel and major events,” said Brakey.

“With many travellers booking well in advance, particularly around holidays and major events, the latest data does not fully show the effect of higher airfares.

“We expect this to become clearer over coming months and will continue to monitor the impact on consumers and the broader aviation sector.”

Zinc Airlines intends to launch from Western Sydney International Airport within the next couple of years, while Koala Airlines could launch this year depending on market conditions. Westaway has also dubbed the prospect a “welcome sign” for the sector.

“The prospect of new domestic airlines could provide greater choice and more competitive airfares for consumers, but the report also makes clear the market remains highly concentrated and barriers to entry are real,” he said.

“Australian airports have consistently supported greater airline competition because more airlines, more routes and more seats ultimately mean better outcomes for passengers and communities.”

The Federal Government in this year’s budget pledged $4.5 million over four years to continue the ACCC’s domestic airline monitoring program.