Qantas expands fleet amid competition watchdog scrutiny

Qantas is expanding its fleet and domestic network in response to strong demand, under the eye of the competition watchdog.

Rex’s entry into the capital city market has had a number of positive benefits for consumers. Picture: Joe Corrigan

Qantas has announced a further expansion to its fleet and domestic network, in response to strong demand for travel.

Under a three-year deal with Brisbane-based airline Alliance, Qantas will have the option to operate 18 Embraer 190s, up from 14, while Jetstar will add another three A320s from its Asian arm.

Qantas Group CEO Alan Joyce said the 94-seat E190 was perfect for connecting capital cities with regional centres.

“Its size, range and economics have already let us start seven new routes that wouldn’t have worked with our existing fleet,” Mr Joyce said.

“When you combine our fleet, network, loyalty program, lounges and the fact we offer both full service and low fare travel options, it puts the group in a good position to deliver for the travelling public as we emerge from Covid-19.”

The announcement came as the Australian Competition and Consumer Commission released its latest quarterly report on the domestic airline industry, showing the Qantas Group’s market share had declined from December to March, from 74 per cent to 69 per cent.

At the same time Virgin Australia grew its market from 24 to 28 per cent, while Rex remained steady on 2 per cent.

ACCC chairman Rod Sims noted that pre-Covid, the Qantas Group’s share was 61 per cent.

“The Qantas Group’s high market share is due to a number of factors, including Jetstar picking up much of the price-sensitive customer segment after Tigerair withdrew, as well as Jetstar benefiting from strong demand for leisure routes,” Mr Sims said.

The report acknowledged that Rex had raised concerns that other airlines were increasing capacity beyond passenger demand in an effort to squeeze out the newcomer.

Rex deputy chairman John Sharp has even gone so far as to accuse Qantas and Virgin Australia of colluding to crush the smaller carrier.

Mr Sims said the ACCC was assessing the impact on competition of expanding capacity and discounting airfares on certain routes.

“Increasing capacity to meet demand and offering discounted fares is generally a sign of competition and is good for consumers,” said Mr Sims.

“However, the ACCC will consider taking enforcement action if capacity and pricing decisions materially damage competition, including by preventing rivals from competing effectively, or driving a competitor off a route or out of business.”

Generally the entry of Rex into the market had been positive for travellers, by increasing choices and triggering fare wars.

According to the report, 18 per cent of domestic travellers flew on routes where there was a choice of three airline groups in March 2021, compared to the pre-pandemic figure of 1.5 per cent.

That figure was now expected to have increased, as a result of more services launched by Rex.

“Passengers flying Melbourne – Gold Coast, Melbourne – Adelaide and Sydney – Gold Coast now have a choice of four airlines, as Qantas, Jetstar, Virgin and Rex are all operating on the routes,” said Mr Sims.

“The impact of increased competition can be seen on all of Rex’s new intercity routes, including Sydney – Melbourne where airfares fell to their lowest level in a decade following Rex’s entry.”

Domestic passenger numbers climbed to 55 per cent on pre-Covid levels in March, up from 41 per cent in December, with recent lockdowns expected to delay airlines’ return to 100 per cent of pre-pandemic levels.

But Qantas remained confident of a rapid rebound in response to the easing of restrictions in Melbourne.

“Victoria represents about 20 per cent of our total network and with restrictions in Melbourne easing and as borders start to reopen, we expect to see a quick rebound in travel demand just as we have in other cities when lockdowns ended,” said Mr Joyce.

“Our forward bookings certainly suggest that’s going to be the case.”

Originally published as Qantas expands fleet amid competition watchdog scrutiny