By Billie Eder
The consumer watchdog has put Qantas, Virgin Australia and Rex on notice after domestic airfares hit a 15-year-high, with no relief in sight for passengers as airlines fail to keep up with demand ahead of the holiday period.
The Australian Competition and Consumer Commissioner (ACCC) has warned that customers will continue to pay up for flights as airlines are keeping capacity tight, reluctant to expand services amid ongoing worker shortages, high jet-fuel prices and challenges from a new COVID wave. The extra revenue has helped the three carriers predict a return to profits after three years of losses.
Airfares have risen as demand for travel continues to surge.
“We accept that the airlines are still experiencing some pandemic-related resource challenges, but the ACCC will be monitoring them closely to ensure they return capacity to the market in a timely manner to start easing pressure on airfares,” ACCC commissioner Anna Brakey said in a statement.
“We would be concerned if airlines withheld capacity to keep airfares high.”
The comments came after the ACCC’s latest Airline Competition in Australia quarterly report showed that the average revenue per passenger – an indication of average airfares across all fare types – was 27 per cent higher in October 2022 than in October 2019.
Discounted economy fares have soared the most because “with fewer flights but strong demand, the airlines don’t currently need to offer special fares to fill their planes”, the competition watchdog said. An index of the discounted economy fares across the nation’s top 70 domestic routes showed they were more than double in November of what they cost in April, it said.
International travel is also strained as seat capacity remains lower than before the pandemic, and, with some airlines temporarily or permanently withdrawing services from Australia, there is less competition to keep prices in check. In October this year, 44 airlines were operating to and from Australia compared with 58 in September 2019.
While consumers will need to dig deeper if they plan to fly away this holiday period, airlines have posted near-record profits. In November, Qantas announced that it expected underlying profit before tax to be between $1.35 billion and $1.45 billion, while Rex and Virgin Australia expect profits this financial year.
A Virgin spokesperson gave passengers a glimmer of hope, saying the airline was hoping to lift capacity before the end of 2022.
“We are working hard to service current levels of demand, with capacity on Virgin Australia’s domestic network expected to reach around 100 per cent of pre-COVID levels in December and January,” the spokesperson said.
“We have every available aircraft in service, and we are increasing flights to popular holiday destinations.”
The ACCC anticipates that price intensity will drop slightly after the Christmas period, but will remain at unusually high levels well into 2023.
Despite flight cancellations returning to almost pre-pandemic levels, passengers are still experiencing regular delays, with Jetstar and Virgin Australia the worst for delayed arrivals in October 2022. However, the Qantas Group announced in late October it would be investing a further $200 million across Qantas and Jetstar to improve its performance.
“The airlines have significantly improved their reliability following historic lows over winter; however, flights are still regularly delayed,” Brakey said. “As we are heading into the summer holidays, the airlines have told us they are keeping additional crew and aircraft on standby to help minimise delays.”
High prices, delays and cancellations aside, the number of bookings indicates Australians are eager to return to domestic and international travel, with more than 4.7 million passengers boarding a plane in October.
There are hopes that low-cost airline Bonza, which aimed to start flights in October 2022 but remains on the ground with the Civil Aviation Safety Authority yet to sign off on its operations, will bring some airfare price relief when it takes off, with a new competitor easing the strain on the domestic market.
“In the current climate of high airfares, competition is more important than ever in helping to constrain prices, and giving consumers more choice,” Ms Brakey said.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.