Domestic fares up 27 per cent, Australia’s competition watchdog warns airlines

Australian airlines have been warned they will be “closely monitored” amid concerns flights are being held back to boost revenue.

In the latest airline competition report, the Australian Competition and Consumer Commission found that ticket prices had increased by 27 per cent between October 2020 and October 2022.

Capacity was the main factor behind the high prices, the report said, as was strong demand and persistently high prices for jet fuel.

According to the report, airlines were flying at about 85 percent of their pre-pandemic capacity, but this volatility in the market had led to historic highs and lows in airfare costs throughout the year.

Discounted economy fares on Australia’s top 70 domestic routes hit an 11-year low in April, before hitting a 15-year high just five months later.

In November, prices had more than doubled compared to April.

ACCC Commissioner Anna Brakey said the volatility in concession fares shows how “fickle” the market is as the industry recovers from the pandemic.

“We accept that airlines are still facing some pandemic-related resource issues, but the ACCC will monitor them closely to ensure they are returning capacity to the market in a timely manner to ease the pressure on fares,” she said.

“We would be concerned if airlines held back capacity to keep airfares high.”

She said Qantas, Virgin Australia and Rex all expect to be profitable in the current fiscal year, which ends in June 2023, after significant losses in the previous three years.

Despite the “strong” demand for air travel despite rising pressures on the cost of living, the report found that airlines “remain reluctant to add capacity to the market.”

Ms Brakey pointed out that the airlines had told the commission they were keeping extra crew and aircraft on standby to fix the record-breaking performance that plagued the industry mid-year.

Canceled flights fell from a July high of 6.4 percent to 2.9 percent in October, while delayed arrivals fell from 45 percent to 30.7 percent over the same period.

Both are still above the long-term average.

International air fares had followed a similar trajectory in recent years, with the average price for a return flight being a third higher than in 2019.
“In the current climate of high fares, competition is more important than ever to contain fares and give consumers more choice,” Ms Brakey said.

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