Since Rex suspended operations between metropolitan cities on 31 July, the average airfare on all major city routes has increased by 13.3 per cent to September. Photo: Rex Media Centre.
A report from the competition regulator shows domestic airline passengers are bearing the brunt of the cost following the exit of Regional Express Airline (Rex) services in routes between the major cities.
Despite jet fuel prices being at their lowest since September 2021 and having fallen 41 per cent in the year to September, the Australian Competition & Consumer Commission (ACCC) report found domestic airfares have remained at similar levels for the same period.
”Best discount economy” tickets increased between July and October this year across many of the services between metropolitan cities that Rex no longer operates on. The most notable jumps include services from Adelaide to Melbourne (up 95 per cent to $296), Melbourne to Gold Coast (up 70 per cent to $432) and Canberra to Melbourne (up 54 per cent to $298).
ACCC Commissioner Anna Brakey said the recent spike in airfares corresponded with a less-competitive domestic airline sector after Rex’s exit from 11 of the 23 services between metropolitan cities.
“While we also typically see a seasonal peak in air travel in September due to major sporting events and school holidays, there were additional pricing pressures this year,” she said.
“Passengers were no longer able to access the lower fares that Rex offered, and airline seating capacity decreased following Rex’s exit. This in turn has contributed to higher airfares.”
Since Rex went into voluntary administration under Ernst & Young Australia (EY), the number of seats on services between metropolitan cities has fallen by 6 per cent. Yet the number of domestic passengers travelling on these routes has remained relatively stable, meaning fuller flights.
Almost half of all passengers flew on routes with either three or four airline groups earlier this year. Currently, no domestic route is serviced by more than two major airline groups – with Qantas and Virgin flying 98 per cent of domestic passengers.
The collapse of Bonza and Rex’s withdrawal from many major city routes “has had an immediate and stark impact” on the domestic airline industry. Source: ACCC.
Ms Brakey said if this duopoly continued, services between metropolitan cities “may have significant longer-term impacts on the domestic aviation sector”.
“With less competition, there is less choice for consumers and less incentive for airlines to offer cheaper airfares and more reliable services,” she said.
“The domestic airline industry has become even further concentrated, and it may be some time before a new airline emerges to compete on popular services between metropolitan cities, with normal barriers to entry and growth exacerbated by aircraft fleet supply chain issues and pilot and engineer shortages.”
In contrast, the report showed the average cost of an international economy airfare departing from Australia has decreased on average (5-10 per cent) between July-September 2023 and July-September 2024.
Last week the Federal Government handed Rex $80 million to keep it operating its regional routes until after next year’s election.
EY has also requested the Federal Court grant it an extension of the voluntary administration process until the end of the financial year (30 June, 2025). Infrastructure Minister Catherine King confirmed that if this is approved, the government would continue to guarantee ticket sales to ensure essential connectivity to regional and remote communities.
While the airline’s administrators said this extension would allow for a strategic overhaul of Rex’s operation, the Transport Workers Union (TWU) believes it’s time for a long-term solution in the form of an independent commission.
“The insatiable profit focus of privatised airlines and airports is failing regional Australia and aviation workers,” TWU national assistant secretary Emily McMillan said.
“A Safe and Secure Skies Commission would ensure stability for the industry and give certainty to workers, businesses and regional communities.”
Qantas and Virgin reported strong financial results for 2023-24, earning $1.06b and $298m, respectively, from their domestic operations. Source: ACCC.
