Australia’s consumer watchdog has outlined its plans to protect airline competition through a new reporting system.

The Australian Competition and Consumer Commission (ACCC) was tasked by federal Treasurer Josh Frydenberg to monitor prices, costs and profits of domestic flights over the next three years.

State and international border closures due to COVID-19 saw a 95 per cent reduction in Australian airline passengers in April 2020 compared with 2019.

The Sydney-Melbourne route, which was previously the second busiest flight corridor in the world, saw passenger numbers fall from 742,000 in April 2019 to 17,000 in April 2020, a fall of around 98 per cent.

“COVID-19 has created some of the most difficult market conditions in Australian aviation history and it’s critical that when the industry starts scaling up domestic flying, any potential damage to competition is identified quickly and acted on,” ACCC chair Rod Sims said.

“A lot has changed since the Treasurer directed us to take on this new role in June. Domestic airline travel was expected to be on its way to returning to more regular operations by now, but infection spikes in some states and tighter border restrictions have delayed the recovery.

“Australia’s domestic airline industry over the next few years may look quite different to the one that went into 2020.

“Air travel is vital for the economy in a country as large and geographically dispersed as Australia. Competition must be safeguarded through this period so our domestic airline industry can meet the needs of consumers, and the economy more broadly.”

The ACCC’s approach to protecting airline competition will include monitoring, reporting, advocacy, investigation and enforcement action.

The watchdog will be looking for certain activities that may damage competition, including airlines entering into agreements with suppliers to prevent competitors from offering services or altering schedules to prevent a competitor entering the market.

Specifically, it will be looking for capacity dumping, predatory pricing and hoarding or airport spots.

It will also be monitoring monthly flight capacity, passenger numbers, and revenue data from Qantas, Virgin and Rex.

“We will act if we identify behaviour that damages competition, either arising from the conduct by airlines directly or through their arrangements with others,” Sims said.

“The ACCC will be reporting to government regularly and this will assist with informed policy development, particularly if we observe signs that competition in the sector is not effective.”

The first report revealed that airline downsizing and expansion is happening concurrently as a result of the COVID-19 pandemic.

Market changes have created opportunities for some airlines to expand into the domestic network as the availability of infrastructure, aircraft, pilots and fuel has improved.

At the same time, major airlines Qantas and Virgin are downsizing and restructuring their fleets and workforces to reduce operating costs.

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