Airlines not price gouging despite 100pc jump in fares, says ACCC

The consumer watchdog has found no evidence of price gouging by airlines, as fares more than double in a matter of months.

The consumer watchdog has found no evidence of price gouging by airlines, despite observing that the cheapest airfares have more than doubled in just seven months.

The Australian Competition and Consumer Commission’s quarterly report on airlines, released on Tuesday, says strong demand for flying meant there was less need to sell fares at a discount and ongoing capacity constraints were justified by pandemic-­related resource challenges.

However, commissioner Anna Brakey warned that the ACCC would be monitoring airlines very closely to ensure capacity was returned to the market in a timely manner to start easing pressure on fares. “We would be concerned if airlines withheld capacity to keep airfares high,” Ms Brakey said.

Travellers have been dismayed to find airlines charging as much as $1150 return for an economy seat on Brisbane-Sydney booked two weeks in advance, and $790 one way for Brisbane-Melbourne.

Adelaide-Melbourne return was as much as $1650 and Melbourne-Sydney $600 one way.

Qantas was currently at 94 per cent of pre-Covid-19 capacity and not expecting to return to 100 per cent of 2019 levels until the first half of 2023. Virgin Australia’s domestic capacity was at 98 per cent in November and expected to match pre-Covid levels in December and January.

Airlines have soared back into profit in the second half of the calendar year, with Qantas forecasting a near record $1.45bn gain, and Virgin Australia and Rex also expecting positive results.

Increased demand for flying is pushing up airfares ahead of Christmas. Picture: NCA Newswire/Gaye Gerard

Ms Brakey said that across all fare types, the ACCC had seen a 27 per cent increase year on year with flexible and business fares actually under pre-Covid prices.

“With reduced capacity in the market, the airlines are having to discount less to fill their flights,” she said. “We do accept there are some operational constraints (preventing full capacity) but we are keeping a close eye on it.”

In the three months from August, flight delays were still much worse than pre-Covid-19, with just over 30 per cent of services behind schedule compared with the long-term average of 18.2 per cent.

Ms Brakey said airlines had told the ACCC they were keeping additional crew and aircraft on standby to minimise delays over the summer holidays.

“The airlines have significantly improved their reliability following historic lows over winter; however, flights are still regularly delayed,” she said.

The busiest routes in terms of passenger loads were those to tourist destinations such as the Gold Coast and Cairns, where about 95 per cent of seats were consistently full.

In contrast, the Golden Triangle routes connecting Sydney, Melbourne and Brisbane were “lagging in their recovery”.

“Melbourne to Sydney was the worst performing of the three, with passengers in October 2022 equivalent to just 77 per cent of pre-Covid levels,” the report says.

“This may reflect the greater significance of business travel on these routes, with demand for business travel returning more slowly than leisure travel.”

An examination of the Sydney-Canberra route highlighted the importance of competition, with fares remaining low with three airlines flying on the route and jumping when Rex exited.

In terms of market share, Qantas flew 38 per cent of passengers in October, down from 39 per cent in July. Jetstar was steady on 23.1 per cent, Virgin Australia crept up to 33.6 per cent from 33 in July, and Rex also gained, moving to 5.3 per cent from 5 per cent.

The ACCC’s investigation into Qantas’s handling of travel credits continued, with the watchdog unable to provide any update on its findings. Ms Brakey said it was a very complicated investigation.

Originally published as Airlines not price gouging despite 100pc jump in fares, says ACCC