AUSTRALIA | New data has suggested airlines have increased airfares and reduced flights on selected routes as fuel costs rise.
Australia’s domestic airlines have responded to higher jet fuel prices by increasing airfares and reducing seat capacity on some routes, the ACCC’s latest Domestic Airline Competition report has found.
Ongoing conflict in the Middle East has disrupted global fuel markets. Jet fuel prices were over 40 percent higher in early June 2026 compared to mid-February 2026, increasing cost pressures across the aviation sector.
Refining margins, the cost of converting crude oil into jet fuel, also remain significantly elevated. The spread between the price of Brent crude oil and jet fuel was 64 percent higher in early June than in February.
The Qantas Group and Virgin Australia both locked in part of their fuel costs ahead of time to reduce the short-term impact of higher prices. Rex reported that due to its smaller scale, it does not hedge against jet fuel prices.
In response to elevated fuel costs, the Qantas Group and Virgin Australia have reduced or suspended several domestic services, increased some airfares, and continued targeted sales to boost demand on more price-sensitive routes.
“Higher jet fuel prices are driving significant changes in how airlines operate, including reducing or suspending services and increasing fares on some routes,” ACCC Commissioner Anna Brakey said.
“We’ve seen services paused or withdrawn on routes such as Adelaide to Mount Gambier, Alice Springs to Brisbane and Darwin to the Gold Coast, meaning fewer travel options for some communities.”
Virgin Australia has reportedly implemented a fare increase of around 5 per cent across domestic economy and business services since March 2026. The Qantas Group has not disclosed the size of its fare increase.
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.
Easter school holidays and major events, including AFL Gather Round in Adelaide and the Australian Grand Prix in Melbourne, contributed to the busiest April for domestic travel since 2019.
Domestic airlines carried around five million passengers in both March and April 2026, while seat capacity also increased 1.9 percent in April compared with a year earlier.
“Demand has remained resilient over recent months, supported by holiday travel and major events," Brakey said.
Average revenue per passenger fell by 3.4 percent in April, but this largely reflects that tickets were purchased earlier before recent fare increases.
“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,” Brakey said.
On-time arrival rates were lower and flights were cancelled more frequently in February and March 2026, before improving in April.
In April, the industry average on-time arrival rate was 82.9 percent, the best result reported since February 2022.
Qantas’ 85.8 percent on-time performance was also the strongest of any airline since February 2022.
On-time performance improved in April following more favourable operating conditions, including fewer weather disruptions and no ground delays attributed to air traffic control at Australia’s four largest airports.
“It’s encouraging to see on-time performance at its highest levels in recent years, giving travellers more confidence that their flight will arrive at the time they booked,” Brakey said.
The industry cancellation rate in April was 1.9 per cent, below the average of 2.2 per cent.
Virgin Australia continued its consistent performance seen in recent years, the best of all airlines at 0.8 percent.
This report also discusses interest from two new potential airline entrants, Zinc Airlines and Koala Airlines.
“Australia’s domestic airline sector remains highly concentrated, with the Qantas Group and Virgin Australia operating 98.5 percent of passenger flights,” Brakey said.
“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 ACCC continues to receive reports from consumers concerned about their rights when flights are disrupted, particularly amid the impact of the ongoing conflict in the Middle East on international travel.
Whether consumers are entitled to a refund or other remedy will depend on the specific circumstances of the booking and disruption.
Consumer guarantees under the Australian Consumer Law are unlikely to apply where a flight is delayed or cancelled due to the actions of a third party - for example, a government closing its airspace or imposing flight restrictions. In these cases, a consumer’s entitlement to a refund will generally depend on the terms and conditions of their booking.
If a consumer proactively cancels or changes their booking, the consumer's guarantees will also not apply, and the available remedy will depend on the terms and conditions of the booking.
However, consumer guarantees may still apply where the disruption is not caused by a third party. This could include situations where a flight is affected by severe weather or by an airline failing to meet safety requirements.
“We encourage consumers with an upcoming international flight to review the terms and conditions of their booking, as well as contact their airline to best understand their options.”
More news here.
