Domestic Airfares Surge After Rex’s Collapse: ACCC Report
Domestic airfares saw a significant increase following the collapse of regional carrier Rex Airlines and the subsequent cancellation of its flights between major Australian capital cities, as revealed in a new report by the Australian Competition and Consumer Commission (ACCC).
Rex’s Collapse had a Big Impact
After Rex Airlines ceased operations and withdrew from key routes, prices for domestic flights soared, particularly on routes where it previously competed with major carriers like Qantas and Virgin Australia.
- Adelaide to Melbourne route prices rose by 95%
- Melbourne to Gold Coast route prices went up by 70%
- Canberra to Melbourne ticket prices increased by 54%
The real average revenue per passenger on these routes experienced a notable 13.3% increase between July and September, coinciding with higher seasonal demand and fuller flights.
With Rex’s departure from the market, the number of available seats on major capital city routes decreased by 6%, leading to fuller flights even though passenger numbers remained relatively stable.
Costs Will Continue to Stay High Without Additional Carriers
The ACCC report warns that Rex’s exit from the capital city market could have lasting impacts on the domestic aviation sector, as major carriers Qantas and Virgin Australia may lack the incentive to lower prices without a competitor in the market.
- A Treasury working paper indicates that the presence of an additional airline on a route can reduce airfares by 5 to 10%.
- Each additional airline further lowers prices, sometimes by more than 15%.
- Monopoly carriers charge about 40c per kilometre, compared to 28c with two airlines, and 19c with three airlines.
Qantas: The Worst Airline for Cancellations
Flight cancellations and delays in the aviation industry have fluctuated over the past year, with Qantas recording a cancellation rate of 2.8% in September, higher than the industry average of 2%.
Rex Airlines had the highest on-time arrival rate in September at 76.6%, followed by Qantas at 76%, Jetstar at 74%, and Virgin Australia at 73%.
While the industry average on-time arrival rate improved slightly from 71.1% in July to 75.5% in September, it still falls short of the long-term average of 80.8%.
Passenger Numbers Below Pre-Pandemic Levels on Some Routes
Although the Melbourne to Sydney route remains the busiest, with over 614,000 passengers, passenger numbers on some routes have yet to recover fully to pre-pandemic levels.
While the Golden Triangle routes connecting Brisbane, Melbourne, and Sydney have seen an increase in passenger numbers, only seven routes have exceeded 100% of pre-pandemic levels as of September 2024.
International Travel is Surging
The report highlights a surge in international travel demand, with decreasing airfare prices and increased travel to and from Australia.
- International economy airfares departing Australia decreased by 5 to 10% between July-September 2023 and July-September 2024.
- Several Asian-based airlines, including Philippine Airlines and Thai Airways, have increased their Australian capacity beyond pre-pandemic levels to meet the growing demand for international travel.
Overall, the aviation industry faces challenges and opportunities as it navigates the changing landscape of domestic and international travel.
Conclusion
The ACCC report sheds light on the impact of Rex’s collapse on domestic airfares, the challenges of maintaining competitive pricing without additional carriers, and the surge in international travel demand. As the aviation sector evolves, airlines must adapt to meet the changing needs and expectations of travelers.
FAQ
1. How did Rex Airlines’ collapse affect domestic airfares?
Rex Airlines’ collapse led to a significant increase in domestic airfares on routes where it previously operated, resulting in higher prices for passengers.
2. Why are additional carriers important for lowering airfares?
Additional carriers on routes create competition, leading to lower airfares as airlines strive to attract passengers. Without competition, major carriers may lack the incentive to reduce prices.
3. What are the trends in international travel highlighted in the report?
The report notes a surge in international travel demand, with decreasing airfare prices and increased arrivals and departures to and from Australia, indicating a growing interest in international travel.