Consumer watchdog puts Australian airlines on notice over high domestic air fares

ACCC says they will closely monitor companies to ensure they do not keep prices high through artificial scarcity

The consumer watchdog has put airlines on notice, warning carriers they will be “closely” monitored to ensure they aren’t deliberately slowing their return to full service capacity so they can “keep air fares high”.

In its quarterly airline competition report, the Australian Competition and Consumer Commission found a 27% increase in all air fare types between October 2019 and October 2022. It noted the price of discounted economy fares had increased the most because “with fewer flights but strong demand, the airlines don’t currently need to offer special fares to fill their planes”.

Flexible economy and business air fares are currently below pre-Covid levels, the watchdog said.

The report quoted recent government data monitoring showing the cheapest domestic air fares in November were more than double April’s prices, a high not seen since 2004. Return economy fares between Sydney and Melbourne – the world’s second busiest air route before Covid – in December were averaging $500 on budget carriers and exceeding $1,000 on Qantas.

Last week, Guardian Australia revealed that Australians facing record high air fares were opting for cheaper overnight trains and coaches, with patronage between Sydney, Melbourne and Brisbane more than doubling in recent months as services sell out.

In October, air passenger levels at 86% of pre-pandemic rates, while the number of available seats being flown by airlines was 85% compared to before Covid. The number of seats on offer on the Sydney-to-Melbourne route in October was 76% of pre-Covid levels for the same month.

Airports are bracing for a busy end of year Christmas travel period. Sydney Airport is expecting more than 2.2 million passengers between 12 December and 1 January across all its terminals – 82% of pre-Covid levels. Of those, 1.4 million are expected to be domestic travellers – 91% of pre-Covid levels.

Sydney airport chief executive, Geoff Culbert, said a concerted effort to help regrow the airport’s workforce meant 95% of domestic passengers were clearing security in less than 10 minutes in November. He anticipated a “busy but not chaotic” holiday season, with the 10 days before Christmas the busiest.

The ACCC commissioner, Anna Brakey, said “historic lows and highs for discount air fares in the same year illustrate how changeable this market has been as the industry recovers from the pandemic”.

“We accept that the airlines are still experiencing some pandemic-related resource challenges, but the ACCC will be monitoring them closely to ensure they return capacity to the market in a timely manner to start easing pressure on air fares,” she said.

“We would be concerned if airlines withheld capacity to keep air fares high,” Brakey said.

International air fares are also inflated, the ACCC said, pointing to less competition. Just 44 international airlines operated to and from Australia in September, down from 58 pre-pandemic.

The report noted capacity was the main factor keeping prices high, as well as strong demand and ongoing high prices for jet fuel.

“Demand for air travel remains strong despite the rising cost of living. However, the airlines continue to hold back adding capacity to the market to manage resource challenges,” the report said.

The ACCC found the cancellations that plagued domestic travel in the middle of the year were down from 6.4% in July to 2.9% in October, while delayed flights were at 30.7% in October compared to 45% in July. However on time performance remains “well below” the long term averages, with Rex and Qantas recording the best performances currently.

Brakey also noted that Qantas Group, which includes budget carrier Jetstar, as well as Virgin and Rex all expect to be profitable in the financial year ending June 2024, following sizeable pandemic losses. She noted Qantas’ projected $1.45bn underlying profit before tax for the six months to December was close to the company’s record for a full year of operation.

In October, Qantas flew the highest share of domestic passengers with 38%, followed by Virgin with 33.6%, Jetstar with 23.1% while Rex flew 5.3%.


Elias Visontay

The GuardianTramp

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