Aussie airfares halved when three airlines fly same route

Many Australians are suffering from a lack of competition when it comes to high airfares, the new Competition Taskforce reveals.

The price of plane tickets are halved when travellers can choose between three airlines on a route rather than one, research by the government’s new Competition Taskforce has revealed.

The findings come after the government faced huge backlash for rejecting Qatar Airways’ request for more flights into Australia last July.

Transport Minister Catherine King had said she made the call in “the national interest”.

Assistant competition minister Andrew Leigh delivered a speech in Melbourne on Tuesday about Australia’s need for greater competition and “signs the intensity of competition has weakened over recent decades”, including in the aviation industry.

“When one airline services a route, airfares average 39.6 cents per kilometre. With two competing airlines, the average fare drops to 28.2 cents. With three competitors, to 19.2 cents,” Dr Leigh said, according to a copy of the speech seen by news.com.au.

Assistant Competition Minister Andrew Leigh. Picture: NCA Newswire/ Gaye Gerard

He further explained: “In other words, the price per kilometre is halved when three competitors fly a route compared with the situation when there is only a single monopoly airline.

“With four or five competitors, the price drops further still. They find these results for all routes and the top 200 routes by passenger traffic.

“Initial results further indicate that the mere threat of competition in the aviation sector has, on average, helped to lower prices.”

Average fare per km by number of carriers on route.

Dr Leigh said many Australians suffer from a lack of competition.

“For example, for a resident of Darwin, it is often cheaper to fly from Darwin to Singapore than it is to fly from Darwin to Sydney – even although the international flight is longer than the domestic one,” he said.

Dr Leigh gave his speech at a Chifley Research Centre event, which is the Australian Labor Party’s think tank.

Australia’s airline industry is dominated by Qantas and Virgin Australia. Picture: NCA NewsWire / Andrew Henshaw

Qantas, which leads Australia’s airline industry, announced an average fare increase of 3.5 per cent for Qantas and 3 per cent for Jetstar in October, citing “sustained increases in fuel prices”.

“The Qantas Group has absorbed recent fuel cost increases but, given current tensions in the Middle East and broader economic factors including a weaker Australian dollar, the price of fuel is expected to remain elevated for some time,” Qantas said in a statement.

A spokesperson said the increase in fares was to recover “some of this higher cost going forward while continuing to absorb the remainder”.