Domestic airfares spike by 56%, says ACCC

Adelaide, Australia - March 21, 2016: Planes from domestic air industry competitors and rivals Qantas and Virgin, coming and going from Adelaide airport.

Domestic airfares increased significantly between April and August this year and may soon climb higher, according to the ACCC’s latest Airline Competition in Australia report.

The quarterly report, released yesterday, shows the cheapest economy airfares were 56 per cent higher in August 2022 than they were in April 2022 when they hit an 11-year low, and business airfares rose by 17 per cent between June and August.

The price rise came as airlines reduced capacity to manage staff shortages, and jet fuel costs climbed.

“After about 18 months of historically low airfares, the cost of domestic flying has risen sharply in response to strong demand, temporary capacity reductions and very high jet fuel prices,” ACCC chair Gina Cass-Gottlieb said.

“Discount economy airfares in August were at their highest point in almost two years.

“In these circumstances, more than ever, the level of competition between airlines is incredibly important to maintain pressure on ticket prices and service levels across the industry.”

In July 2022, about 4.7 million passengers flew domestically, which was the highest number since the start of the pandemic, and 89 per cent of the passenger volume in July 2019.

In June 2022, the number of domestic airline passengers was 97 per cent of the passengers in the same month in 2019.

Travel to Queensland was particularly popular in July 2022, and the number of passengers flying between Canberra and the Gold Coast almost doubled compared to July 2019. Travel between the Gold Coast, Melbourne and Adelaide also surpassed pre-pandemic demand.

“Pent-up demand for leisure travel, particularly from people in the colder southern states, continues to drive the recovery in passenger numbers. Demand on routes between Canberra, Melbourne and Sydney has lagged behind, in part due to the slower recovery of corporate and business travel,” Cass-Gottlieb said.

The strong demand for travel created challenges for an aviation industry still rebuilding its workforce and dealing with high rates of illness. In July 2022, the domestic airline industry reported the worst on-time performance on record, and airlines cancelled flights at a rate over three times the long-term average.

“We are aware that for many consumers, long-awaited travel fell well short of expectations with record delays, very high rates of cancellations, lost baggage, and long wait times for call centres. We have been engaging closely with airlines to understand the source of these problems,” Cass-Gottlieb said.

Rex performed significantly better than the other airlines in terms of punctuality and the rate of cancellations, which the airline attributed to keeping its staff despite reduced flying over the last two years.

Airlines have advised the ACCC that on-time performance has improved more recently as rates of sickness have subsided, the aviation industry recruits more people, and the airlines reduce the number of scheduled flights.

“We expect that airlines will be honest and proactive in communicating to passengers the reasons why a flight is delayed or cancelled, how the consumer guarantees apply, and what other compensation they are entitled to,” Cass-Gottlieb said.

The combination of high demand for travel and reduced capacity also resulted in fuller flights. In July 2022, 82 per cent of seats were filled, while many routes to northern Australia surpassed 90 per cent. With such full planes, it has often been difficult for people to find available seats when their initial flight has been cancelled.

Qantas, Virgin and Rex all increased their market share between April and July 2022 after winning passengers from Jetstar. The Qantas Group-owned Jetstar carried 23 per cent of all domestic passengers in July, down from 28 per cent in April. Qantas carried 39 per cent of passengers in July, compared to 33 per cent for Virgin and 5 per cent for Rex.

Image source: iStock/BeyondImages

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accc Airline Competition in Australia report