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 per cent 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 per cent, 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 per cent 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,” Ms 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,” Ms Brakey said.
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 per cent to $296), Melbourne to the Gold Coast (up 70 per cent to $432) and Canberra to Melbourne (up 54 per cent to $298).
Despite jet fuel prices falling by 41 per cent 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 per cent), there was no change in real terms (-0.2 per cent).
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 per cent 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.
Airline cancellations have fluctuated throughout 2024
The industry average cancellation rate worsened from 2.1 per cent in May 2024 to 3.0 per cent in July 2024. It has since improved to a low of 2.0 per cent in September 2024.
Rex had the lowest cancellation rate at 1.2 per cent in September 2024, followed by Jetstar (1.3 per cent), and Virgin Australia (1.4 per cent). Qantas had the worst cancellation rate among the major airlines at 2.8 per cent.
The industry average on-time arrival rate improved slightly from 71.1 per cent in July to 75.5 per cent in September 2024.
“On-time performance has a direct impact on consumers’ travel plans and so we expect the airlines to continually work to improve this figure,” Ms Brakey said.
Above is a media release (12/11/2024) form the Australian Competition and Consumer Commission. The original article, including a graph and background section, is available here.