Competition watchdog warns airlines as domestic airfares rise

The competition watchdog has issued a stark warning to airlines over concerns flights are being withheld to boost revenue.

Australia’s airlines have been issued a stark warning they’re being “closely” monitored over concerns flights are being withheld to boost revenue.

In the latest airline competition report, the Australian Competition and Consumer Commission found ticket prices had jumped 27 per cent between October 2020 and October 2022.

Capacity was the main factor keeping prices high, the report found, as well as strong demand and ongoing high prices for jet fuel.

The report noted airlines were flying at about 85 per cent of their pre-pandemic capacity, but that volatility in the market had led to historic highs and lows for airfare costs over the year.

Discounted economy fares across Australia’s top 70 domestic routes hit an 11-year-low in April, before reaching a 15-year-high just five months later.

In November, prices had more than doubled what they were in April.

The report found cancellations and delays had reduced from the record-poor performance over winter in 2022. Picture: NCA NewsWire / Dan Peled

ACCC Commissioner Anna Brakey said the volatility for discount airfares illustrated how “changeable” the market has been as the industry recovers from the pandemic.

“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,” she said.

“We would be concerned if airlines withheld capacity to keep airfares high.”

She said Qantas, Virgin Australia and Rex all expect to be profitable in the current financial year ending June 2023 following significant losses over the previous three years.

Despite “strong” demand for air travel despite the rising cost of living pressures, the report found airlines “continue to hold back adding capacity to the market”.

Ms Brakey noted airlines had informed the Commission they were keeping additional crew and aircraft on standby to address the record poor performance which plagued the industry in the middle of the year.

Cancelled flights fell from a July high of 6.4 per cent to 2.9 per cent in October, while delayed arrivals fell from 45 per cent to 30.7 per cent over the same period.

Both remain higher than the long-term average.

International airfares had followed a similar trajectory over the past few years, with the average price of a return flight one-third higher than in 2019.
“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.

Originally published as Competition watchdog warns airlines as domestic airfares rise