Spotlight on Qantas, Virgin airfares following Rex exit

The nation’s two biggest airlines have been put on notice by the competition watchdog that they will face action if fares suddenly leap on routes Rex used to fly.

The competition watchdog has warned Qantas and Virgin Australia it will act on any evidence of price gouging on routes where the duopoly previously competed with Rex.

The Australian Competition & Consumer Commission’s quarterly domestic airline report, released Thursday, focused heavily on the demise of Rex three months after Bonza’s failure, and the implications for travellers.

ACCC commissioner Anna Brakey said on the 13 routes where Rex competed with Qantas, Jetstar and Virgin Australia, fares had fallen an average of 25 per cent.

Now that Rex was no longer in those routes, Ms Brakey said the commission would use its inquiry function to keep a close eye on fares and take enforcement action as appropriate.

“We did conduct an investigation back in 2021-22 into the response of the other airlines to Rex’s expansion into the metropolitan routes,” said Ms Brakey.

“It was the case that during that time, there were a number of factors that were happening all at the same time. We are watching very closely at the moment what will happen with airfares and performance with the exit of Rex from those metropolitan routes with the absence of the Covid impacts.”

Up until the end of June, airfares had fallen 5.2 per cent compared to the same time a year ago and reliability had lifted, the ACCC report said.

However, Bureau of Infrastructure, Transport and Regional Economics’ data for August showed full price economy fares had jumped to their highest level since March 2021 — when the Rex 737 services began.

Qantas and Virgin Australia have been placed on notice by the ACCC they will face action if fares increase too steeply in the wake of Rex’s demise.

Ms Brakey conceded the information in the latest ACCC report was already dated, and the next quarter would focus keenly on fare movements and changes in on-time performance.

“Importantly, we have this inquiry function to keep an eye on what’s going on in the domestic airline industry, it is a really concentrated market,” she said.

“We have powers under the competition and consumer law, and we will enforce those powers.”

She said there was no single factor that contributed to the collapse of Rex and Bonza, with any new airline facing “complications and costs” to build a network.

“Airlines need access to good slots, they need access to aircraft, they need access to trained staff, and they need to be able to provide the services at the times customers want, and in a really reliable way,” said Ms Brakey.

The Australian Airports Association welcomed the ACCC report, saying it clearly demonstrated more competition equalled lower fares.

AAA head of policy and advocacy Natalie Heazlewood said unfortunately there were a number of obstacles facing challengers to the airline duopoly of Qantas and Virgin.

“While Rex’s move into the golden triangle was ambitious, administrators have highlighted supply chain issues and pilot shortages were also key factors in the airline’s significant debt,” Ms Heazlewood said.

“Incentivising and removing barriers to new entrants, addressing workforce shortages and the reforms to Sydney Airport’s complex slot scheme, will help new and expanding airlines.”