AUSTRALIA | Domestic travel across Australia has crippled options for travellers since Rex Airline's departure, according to the ACCC.
Domestic airline passengers face less choice and higher airfares following Rex’s recent exit from services between metropolitan cities, the ACCC’s latest Domestic Airline Competition report has found.
Since Rex suspended operations on its services between metropolitan cities on 31 July 2024, the average airfare on all Major City routes has increased by 13.3 percent to September 2024.
“The recent spike in airfares corresponds with a less competitive domestic airline sector after Rex’s exit from 11 of the 23 services between metropolitan cities,” ACCC Commissioner Anna Brakey said.
“While we also typically see a seasonal peak in air travel in September due to major sporting events and school holidays, there were additional pricing pressures this year. Passengers were no longer able to access the lower fares that Rex offered, and airline seating capacity decreased following Rex’s exit. This in turn has contributed to higher airfares.”
Since July 2024, the number of seats on services between metropolitan cities fell by 6.0 percent, while the number of domestic passengers travelling on these routes remained relatively stable, which led to fuller flights.
Earlier this year, almost half of all passengers flew on routes with either three or four airline groups. Currently, there is no domestic route serviced by more than two major airline groups, with Qantas Group and Virgin Australia servicing 98 percent of domestic passengers.
“The exit of Rex as a third competing airline group on services between metropolitan cities may have significant longer-term impacts on the domestic aviation sector,” Brakey said.
“The domestic airline industry has become even further concentrated, and it may be some time before a new airline emerges to compete on popular services between metropolitan cities, with normal barriers to entry and growth exacerbated by aircraft fleet supply chain issues and pilot and engineer shortages.”
“With less competition, there is less choice for consumers and less incentive for airlines to offer cheaper airfares and more reliable services,” Brakey added.
The report found that airfares for ‘best discount economy’ tickets have increased from July 2024 to October 2024 across many of the services between metropolitan cities that Rex no longer operates on. Most notably this includes services from Adelaide to Melbourne (up 95 percent to AUD $296), Melbourne to the Gold Coast (up 70 percent to AUD $432) and Canberra to Melbourne (up 54 percent to AUD $298).
Despite jet fuel prices falling by 41 percent in the 12 months to September 2024, domestic airfares have remained at similar levels for the same period. While the average revenue per passenger was higher in nominal terms (+2.6 percent), there was no change in real terms (-0.2 percent).
In contrast, Flight Centre’s FCM Travel and Corporate Traveller showed that the average cost of an international economy airfare departing from Australia decreased on average by 5-10 percent from July-September 2023 to July-September 2024.
Rex entered voluntary administration in July but continues to operate its regional routes. The government has guaranteed regional flight bookings for Rex customers throughout the voluntary administration process.
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