AUSTRALIA | The ACCC is closely monitoring Australia’s airline industry in response to unfolding events in the Middle East, a key development observed in its latest Domestic Airline Competition report.
The conflict has caused significant disruption to international air travel, particularly to Europe, including airspace closures, flight cancellations, and route diversions.
“The Middle East plays a critical role in global aviation, and we’ve already seen airline operations affected worldwide, with potential for impacts to flow into our domestic market,” said ACCC Commissioner Anna Brakey.
Whether consumers are entitled to a refund or another remedy for flights disrupted by the Middle East conflict will depend on the specific circumstances of each booking or cancellation.
The consumer guarantees in the Australian Consumer Law are unlikely to apply if the airline delays or cancels a flight due to the actions of a third party, such as a government closing its airspace or implementing flight restrictions.
In these circumstances, whether a consumer is entitled to a refund will depend on the terms and conditions of their booking.
However, airlines may still be required to provide a remedy under the consumer guarantees if the delay or cancellation is not due to the actions of a third party, such as a failure to meet safety standards or a natural disaster.
We have been encouraging consumers with an upcoming international flight to contact their airline to understand their options.
While the immediate impacts have centred on disruptions to international services, airlines and passengers are already feeling the impact of significant increases in global jet fuel prices.
“Major Australian airlines typically hedge a proportion of their fuel needs, which helps to insulate them from short-term fuel price movements,” Brakey added.
“However, if jet fuel prices remain elevated for a prolonged period, airline costs may increase, and this could ultimately lead to higher domestic airfares.”
Reduced supply of long-haul services from the Middle East has shifted passenger demand to hubs in Asia, particularly on routes to Europe. This high demand is placing upward pressure on airfares in markets with constrained capacity.
Airlines can change prices in response to demand, supply or input costs, but they must not make false or misleading statements about the reasons for any price increases.
“While market conditions will ultimately determine the cost of flying, we are closely monitoring price movements, market behaviour and the airlines’ representations to consumers, and will act if there is behaviour that contravenes competition and consumer laws.”
Domestic service reliability improved overall, but cancellation rates varied between airlines in the January quarter
While international disruptions and cost uncertainties have emerged more recently, the report also showed that overall performance improved over the quarter, but cancellation rates varied between carriers.
Following a weaker November, on-time performance did steadily improve over the quarter in the domestic market. However, the industry's on‑time arrival rate was 78.4 percent in January 2026, still below the long‑term average of 80.5 percent.
The industry cancellation rate was 2.1 percent in January 2026, slightly below the long-term average of 2.2 percent. Rex and Virgin Australia reported cancellation rates of 0.8 percent and 0.9 percent, respectively, in January, well below the long-term average.
Jetstar’s performance was consistently worse than the other airlines across both metrics, recording a 67.7 percent on-time arrival rate and cancelling 3.2 percent of all flights in January. Qantas also recorded an elevated cancellation rate of 2.7 percent.
“Jetstar’s on‑time performance in the quarter to January 2026 was well below the industry long‑term average, which is a concern for passengers.”
Domestic capacity growth continues to outpace passenger demand
Airlines continued to increase seat capacity over the quarter to January 2026, supported by new aircraft deliveries, redeployments across domestic networks, and greater use of existing fleets.
Brakey was pleased to see airlines increase capacity, offering two percent more seats in January 2026 than a year earlier. Capacity growth outpaced passenger demand for six months in a row. Still, total seat capacity remained 3.3 percent below pre-COVID levels in January.
Average airfare prices also fell during the quarter to January 2026, but were still 4.3 percent higher in December 2025 compared to December 2024.
Passenger demand followed seasonal patterns, remaining strong through November and December 2025, before easing in January 2026 as holidays wound down and corporate travel demand remained low.
The Easter school holidays and ANZAC Day are again both expected to drive an increase in demand for leisure travel in April.
The Qantas Group and Virgin Australia’s mid-year financial results highlight low domestic competition and strong passenger demand
The Qantas Group and Virgin Australia both reported strong financial performance and growth in the first half of 2025-26.
The Qantas Group reported record underlying earnings before interest and taxes (EBIT) of AUD 1.59 billion, an increase of 5.4 percent from the first half of 2024-25.
Virgin Australia reported an underlying EBIT of AUD 490 million across its whole operations, including its domestic, international, and frequent flyer programs. This was an increase of 11.7 percent from the first half of 2024-25.
The strong financial results reported by The Qantas Group and Virgin Australia demonstrate the ongoing resilience of Australia’s domestic aviation market, driven by consistently strong passenger demand and favourable operating conditions.
“Nearly 99 percent of all flights were serviced by either Qantas Group or Virgin Australia, with high barriers to entry in the aviation industry contributing to a concerning lack of competition and choice for consumers.”
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