Airlines that love competition: Do you see pigs fly?

If you ever hear a corporate executive say they love competition, look for the forked tongue – even though “we welcome competition” is one of the most regularly used phrases in business.

Cam Wallace, the head of Qantas’ international division, used it in his opening remarks of the airline’s submission to the competition regulator in response to an application by its rival Virgin for an alliance with Middle Eastern carrier Qatar. He then went on to outline all the reasons why this particular tie-up was bad for Australian travellers.

Airfares jumped after collapsed carrier Rex’s departure from intercity routes Credit: Kate Geraghty

This shouldn’t be taken as singling out Wallace or Qantas. Australia is packed with industries dominated by a small number of large companies, be it in aviation, telecommunications, supermarkets or banks. All of them say competition is a good thing.

Consumers tend to view such comments with a degree of scepticism. On Tuesday, the Australian Competition and Consumer Commission highlighted just how justified that scepticism is.

The competition watchdog found that as of September, the average airfare on all major city routes in Australia had increased by 13.3 per cent since Rex suspended operations on its services between metropolitan cities in July.

If some travellers are wondering why they are feeling a bit of a back-pocket sting of late, the ACCC said prices for “best discount economy” tickets have increased by up to 95 per cent in that time.

The best discount airfares from Adelaide to Melbourne have gone up 95 per cent, from Melbourne to the Gold Coast by 70 per cent, and from Canberra to Melbourne by 54 per cent.

Against the backdrop of the cost-of-living crisis, this report couldn’t have landed at a more inopportune time.

Qantas Domestic chief executive Markus Svensson said on Tuesday that the ACCCs report on fare increases for particular routes doesn’t reflect the average fares customers are actually paying.

“It is a snapshot of the lowest fares available to purchase on a particular day three weeks prior to travel and does not factor in events which may impact demand and fares,” he said in a statement.

“The day selected in the latest report was 31 October, which is when Melbourne was hosting Coldplay. As such, demand was significantly higher on flights into Melbourne which means lower fares were snapped up early and the fares left available to purchase three weeks out were higher than usual.”

The ACCC’s report came in on the same day the government announced it would pump $80 million into Rex to allow it to continue operating its regional routes until next June. If the airline is not sold by that time, its future will be uncertain. Rex entered administration in July.

But the government was never going to prop up Rex’s intercity business – the one that resulted in it bleeding $1 million in cash a week and dragging the whole company into a financial malaise.

Whether it was Rex’s inability to get landing slots in major city airports or its inability to compete with the larger airlines and their more comprehensive network benefits and loyalty programs, the reality is there is now a well-occupied graveyard of airlines that played the third carrier role in domestic aviation – and lost.

There was never any suggestion that the government cavalry would arrive to help the ailing airline Bonza, which hit the skids three months before Rex sought voluntary administration.

It’s a delicate issue for Prime Minister Anthony Albanese, given that the opposition has accused his government of running a protection racket for Qantas.

It controversially blocked Qatar this year from offering additional flights into Australia without a sufficiently plausible reason.

Meanwhile, the ACCC’s Domestic Airline Competition in Australia report said that after Rex left the intercity market, “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.”

“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,” commissioner Anna 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.”

It may be “some time” – or never.

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