Cheaper airfares, more flights delayed as Qantas and Jetstar dominate

Airfares might be coming down for domestic routes but more flights are being delayed or cancelled, the Australian Competition and Consumer Commission says.

Qantas and Virgin Australia remain the dominant domestic carriers with 94 per cent of the market.

Qantas and Virgin Australia have been urged to invest more in the reliability of flights, after the competition watchdog found the Covid recovery was essentially over but airline performance remained disappointing.

In its first airline monitoring report since June 2023, the Australian Competition and Consumer Commission said airfares had fallen to near pre-pandemic levels thanks to the expansion of Rex and entry of Bonza in the domestic market.

Only the cheapest fares remained above what they were four years ago, as passenger numbers sat just below pre-Covid figures, at about 94 per cent.

ACCC chair Gina Cass-Gottlieb said for the first time in history, all four airline groups were competing on one route — Gold Coast to Melbourne — but there was still a long way to go to lift performance.

“We are concerned that there continues to be poor reliability,” said Ms Cass-Gottlieb.

“To have over twice the long term average of flight cancellations (5 per cent), and only 63.6 per cent of flights arriving on time in December, that does concern us.”

She said external factors such as severe weather and an air traffic controller shortage had contributed to the performance but airlines must also take responsibility.

“In that respect we note that the Qantas Group announced last year an underlying profit before tax of $2.7bn and Virgin, a more modest $129m,” Ms Cass-Gottlieb said.

“We do know that the two large providers have the capacity to invest in the factors they have control over, that relate to reliability.”

It was also of concern, that the domestic aviation market remained “highly concentrated” with the Qantas and Virgin Australia groups commanding a 93 per cent share.

In contrast Rex held 5.3 per cent and Bonza 1.7 per cent.

Ms Cass-Gottlieb said that was unlikely to change significantly until the slot scheme at Sydney Airport was reformed, to ensure airlines other than Qantas and Virgin Australia had more access.

“It is the right time for the government and department to act on this issue because we do for the first time in a while have two new entrants are looking to expand,” she said.

“From a competition benefit point of view and a flying customer point of view that is a very important next step.”

A Qantas Group spokeswoman said they had worked hard to reduce delays and cancellations since the challenges of December, even hiring external consultants to help lift performance.

She said in January 77 per cent of Qantas flights departed on time, nearing the long-term industry average of just over 81 per cent.

“Flight cancellations were 2.5 per cent just above the long-term industry average,” the spokeswoman said.

“While our reliability has improved, we know there is still more work to do.”

Virgin Australia also claimed to have seen “significant improvement” and looked forward to adding more seat capacity with the arrival of 11 new Boeing 737 Max 8s this year.

“At Virgin Australia, our focus is and will remain on providing great value and choice to travellers across our domestic and short-haul international network,” said a spokeswoman.

Australian Airports Association chief executive James Goodwin said it was concerning that the cheapest airfares sold by airlines had not yet fallen to pre-pandemic levels, at a time when cost of living pressures were so intense.

“The ACCC report showed the real price index of discount fares was still 4.5 per cent higher in January than in the same month four years ago,” Mr Goodwin said.

“It is important Australia considers ways to unlock greater competition with the domestic airline industry one of the most concentrated markets in Australia.”

ACCC chair Gina Cass-Gottlieb has urged the government to reform Sydney Airport’s slot system, to promote greater competition in the airline industry. Picture: Aaron Francis