ACCC Monitoring Domestics Airfares in Australia

Australian Competition and Consumer Commission (ACCC), Australia’s antitrust regulator, on Thursday said that it will continue to closely monitor domestic airfares on services between metropolitan cities following withdrawal of Regional Express (Rex) from local market.

In its latest domestic airline competition report, ACCCC said that the conditions for consumers improved with declines in airfares, reduced cancellations and improved on time rates for flights over the first half of 2024.

However, the ACCC report cautioned that consumers may miss out on the benefits of a more competitive domestic airline market if Rex is unable to re-commence its services between metropolitan cities.

Rex continues to provide important connectivity to communities across 33 regional and remote routes and the government has announced that it will guarantee regional flight bookings for Rex customers throughout the voluntary administration process.

The collapse of Bonza and withdrawal of Rex from routes between metropolitan cities means that, as of July 2024, no domestic route has more than two competing airline groups. In June 2024, Rex had accounted for about 5% of domestic passengers and flew 44 routes across 56 destinations in Australia.

While Bonza and Rex provided relatively limited capacity on these metropolitan competing routes, the exit of both airlines on these routes may mean that consumers face higher airfares and reduced choice for domestic travel.

ACCC Commissioner Anna Brakey said that consumers generally enjoy lower airfares where there is more competition on a route. With the suspension of Rex’s services between metropolitan cities, the regulator was closely monitoring airfares and remain vigilant to any increases in prices on routes that Rex is no longer flying on.

Between November 2023 and April 2024, for the first time in Australia, there was a route with four competing airline groups (between Melbourne and the Gold Coast). In June 2024, routes serviced by three airline groups represented 50% of domestic passengers.

Compared to their 2019 levels, airfares on routes with increased competition have been lower than the broader domestic network in every month since February 2023, indicating that increased competition has resulted in lower airfares for consumers.

Airfares Decline in H1 of 2024

Airfares have generally been declining through 2024. Compared to June 2023, average revenues per passenger were lower in both nominal terms (-1.6%) and real terms (-5.2%).

This overall trend has been driven by falling average fares on major city routes, which typically have had more competition than regional and remote routes. Airfares have fallen on some east-west routes and Gold Coast routes in particular.

The cancellation rate for Australia’s domestic airlines dipped below the long-term industry average for the first time since October 2020, the ACCC’s latest domestic airline competition report has found.

“A competitive aviation sector is important to all Australians and the ACCC remains engaged with stakeholders so that we can understand and protect competition in this sector. The concentrated nature of Australia’s domestic aviation industry reinforces the importance of the ongoing transparency and scrutiny we bring through our monitoring role,” Anna Brakey said.