Domestic airline competition under pressure o

The report shows improved conditions for consumers with declines in airfares, reduced cancellations and improved on time rates for flights over the first half of 2024. However, the ACCC cautions 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 five per cent 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.

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

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 per cent 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.

"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," Ms Brakey said.

Share of passengers on routes serviced by 1, 2, 3 and 4 airline groups - January 2021 to June 2024

Airfares declined in first half 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 per cent) and real terms (-5.2 per cent).

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.

Index of average fare revenue per passenger - June 2019 to June 2024

Airline cancellations reach their lowest rate in almost four years

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.

In May 2024, 2.1 per cent of flights were cancelled across the industry, compared to the long-term industry average of 2.2 per cent. This is down from a peak of 5.0 per cent in December 2023.

"The latest results demonstrate the aviation industry is capable of outperforming the long-term industry averages and this is something we will continue to watch closely," Ms Brakey said.

In June 2024, the average cancellation rate increased to 2.5 per cent, with Qantas recording the highest cancellation rate of any airline at 3.3 per cent. This was followed by Jetstar at 2.2 per cent and Virgin Australia at 1.9 per cent. Rex recorded the lowest cancellation rate amongst the airlines in June 2024 at 1.1 per cent.

Despite on-time arrivals stabilising over the last quarter and at 76.8 per cent in June 2024, they are still below the long-term industry average of 80.9 per cent.

The report also found that airline passenger levels and seat capacity decreased in June 2024, representing 97.8 per cent and 96.8 per cent of pre-pandemic levels.

Cancellation rates and on-time arrivals in June 2024

New and expanding airlines face significant challenges

This quarter's report also looked at aircraft fleet management in Australia and the challenges airlines face with expanding their capacity and acquiring newer aircraft.

The current issues faced by Rex, as well as Bonza's collapse after just over 12 months of operations, highlights the significant challenges faced by new and expanding airlines in this sector.

"Fleet size can impact the ability for an airline to compete effectively. Airlines with a larger fleet are more likely to achieve economies of scale in terms of acquiring the aircraft, training staff and maintenance support," Ms Brakey said.

Across the sector, airlines continue to face barriers to expanding capacity, updating an aging fleet, or securing parts required for maintenance due to global supply chain issues.

"These challenges can be exacerbated for airlines with a smaller fleet size, who may not have the necessary aircraft to service their scheduled flights when faced with delays and fleet repairs," Ms Brakey said.

Airlines with a larger fleet also benefit from having more options to switch aircraft around to accommodate seasonal peaks.

Notes for editors

When a business enters administration or liquidation, consumers' ordinary legal rights can be affected. What happens to consumers' rights with respect to outstanding bookings, credits, gift cards, refunds, and other reimbursements will depend on what happens in the administration or liquidation process.

In relation to Rex, the appointed administrator is Ernst and Young. Ernst and Young have provided public information for impacted customers, including those needing to re-book flights. Impacted customers can also contact the administrators via email (rex.customers@au.ey.com

) for information.

Consumers who have paid for their flights with credit card, debit card or through a secure payment provider such as PayPal, may be able to get their money back by requesting their financial institution or card provider reverse the payment. This is known as a 'chargeback'.

And as above, the government has announced it will guarantee regional flight bookings for Rex customers throughout the voluntary administration process.

In relation to Bonza, the appointed liquidator is Hall Chadwick. Impacted customers can contact liquidators via phone (03 8678 1600) or email (bonzacustomers@hallchadwick.com.au) for information.

More general information about what happens when a business goes into administration or liquidation is available on our website.

Background

On 6 November 2023, the Treasurer directed the ACCC to recommence domestic air passenger transport monitoring. Under this direction the ACCC is to monitor prices, costs and profits relating to the supply of domestic air passenger transport services for a period of three years and to report on its monitoring at least once every quarter.

The ACCC collects data from Rex, Jetstar, Qantas, Virgin Australia, and Bonza (while it still operated) for monitoring purposes.