Consumer watchdog warns Australian airlines over high domestic airfares

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The consumer watchdog has warned airlines, warning carriers they will be “closely” monitored to make sure they are not deliberately slowing their return to full service capacity so they can “keep airfares high”.

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

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

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The report cited recent government monitoring data that showed the cheapest domestic airfares in November were more than double April’s prices, a high not seen since 2004. $500 on budget carriers and over $1,000 on Qantas .

Last week, Guardian Australia revealed that Australians facing record airfares have opted for cheaper overnight trains and coaches, with patronage between Sydney, Melbourne and Brisbane more than doubling in recent months due to sellouts.

In October, air passenger levels were at 86% of pre-pandemic fares, while the number of available seats flown by airlines was 85% of pre-Covid levels. The number of seats offered on the Sydney-Melbourne route in October was 76% of pre-Covid levels for the same month.

Airports are preparing for a busy end-of-year Christmas travel season. Sydney Airport is expecting more than 2.2 million passengers between 12 December and 1 January across its terminals, 82 per cent of pre-Covid levels. Of these, 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 per cent of domestic passengers cleared security in less than 10 minutes. in November. He anticipated a “busy but not chaotic” holiday season, with the 10 days before Christmas being the busiest.

ACCC Commissioner Anna Brakey said “historic lows and highs for discount airfares in the same year illustrate how volatile this market has been as the industry recovers from the pandemic.”

“We accept that airlines are still facing some resource challenges related to the pandemic, but the ACCC will monitor them closely to ensure they return capacity to the market in a timely manner to begin easing pressure on airfares,” he said.

“We would be concerned if airlines deny the ability to keep airfares high,” Brakey said.

International airfares are also inflated, the ACCC said, indicating less competition. Just 44 international airlines operated to and from Australia in September, down from 58 before the pandemic.

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The report found that capacity was the main factor keeping prices high, as were strong demand and consistently high prices for jet fuel.

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

The ACCC found that cancellations plaguing domestic travel mid-year fell from 6.4% in July to 2.9% in October, while flight delays were 30.7% in October compared to the 45% in July. However, on-time performance remains “well below” long-term averages, with Rex and Qantas currently posting the best performers.

Brakey also noted that the 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 losses due to the pandemic. He noted that Qantas’ projected $1.45 billion pre-tax profit for the six months through December was close to the company’s record for a full year of business.

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

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