Domestic air fares soar well above pre-pandemic levels, and additional revenue from more expensive flights sees Australia’s three airline groups project profitable financial year after three years of heavy losses ACCC’s latest Australian Airline Competition report reveals.
Average revenue per passenger in October 2022 is 27% higher than in October 2019, according to the quarterly report released today.
ACCC Commissioner Anna Blakey said: “Strong demand and supply constraints on travel have pushed up airfares as airlines scaled back schedules in response to high jet fuel costs and operational challenges.
Average fare revenue per passenger indicator – Jan 2019 to Oct 2022
Source: Data collected by ACCC from Qantas, Jetstar, Virgin Australia and Rex.
Note: Figures are combined fares earned from Business Class and Economy Class passengers. Figures excluding ancillary service income. Excluding Tigerair.
Among the various fare types, discounted economy fares are growing the most. That’s because airlines don’t currently have to offer special fares to fill their planes due to low flight numbers but high demand.
The index of discounted economy fares on Australia’s top 70 domestic routes in November 2022 was more than double its 11-year low in April 2022. In September of this year, the same index for the cheapest available fares hit his 15-year high.
“Historical lows and highs in discount air fares in the same year show how volatile this market can be as the industry recovers from the pandemic,” Blakey said.
“While airlines acknowledge that they still have pandemic-related resource issues, the ACCC will carefully monitor them so that it can return capacity to the market in a timely manner to begin easing pressure on air fares. I will monitor.”
“We would be concerned if airlines withheld their ability to keep airfares high,” Blakey said.
Flexible economy and business fares have not increased as much as discounted fares and are below pre-COVID-19 prices as of November 2022.
After considerable losses from the pandemic, the airline forecasts positive financial profits on the back of strong demand and high airfares. Qantas Group, Virgin Australia and Rex all expect to be profitable in the financial year ending June 2023. Qantas Group expects an underlying pre-tax profit of $1.35 billion to $1.45 billion in the six months to the end of 2022. We approach the company’s full-year sales record.
Flight cancellations and delays surged this winter as airlines dealt with high rates of staff illness, labor shortages and supply chain disruptions. Staff absenteeism has declined, but the industry continues to grapple with labor shortages and supply chain issues. There is also uncertainty about how his recent rise in COVID-19 cases will affect the industry.
“For the summer holidays, airlines have said they have additional crews and aircraft on standby to minimize delays,” Blakey said.
Jetstar, Qantas, Rex and Virgin Australia have canceled 2.9% of domestic flights in October 2022. It was down from 6.4% in July and closer to its long-term average of 2.1%. About 31% of all flights were delayed in October, compared to the long-term average of about 18%. Qantas and Rex had the lowest cancellation rates for his October flights, and Qantas had the highest on-time rate among the airlines.
“Airlines have significantly improved reliability after historically low levels over the winter. However, flights are still regularly delayed,” Blakey said.
Domestic Flight Cancellations and Delays – July 2022 and October 2022
| Canceled flights (%) | Arrival delay (%) | |||
|---|---|---|---|---|
| July 2022 | October 2022 | July 2022 | October 2022 | |
| Qantas Airways | 6.2 | 2.2 | 47.0 | 25.8 |
| rex | 2.1 | 2.2 | 31.7 | 31.7 |
| Virgin Australia | 7.7 | 3.6 | 47.5 | 35.1 |
| Jetstar | 8.8 | 3.9 | 48.5 | 35.6 |
| industry total | 6.4 | 2.9 | 45.0 | 30.7 |
| long term average | 2.1 | 2.1 | 18.2 | 18.2 |
Source: BITER, a monthly report of regular performance within Australia.
The report also explores the key factors affecting airfare, showing that the level of competition on a particular route is a key factor in determining what consumers pay. Other important factors are when bookings are made, ticket demand and the airline’s corporate strategy.
“In the current climate of skyrocketing airfares, competition is more important than ever in keeping prices in check and giving consumers more choice,” Blakey said.
Background
On 19 June 2020, the ACCC was instructed by the former Treasury Secretary to monitor prices, costs and profits in Australia’s domestic aviation industry and to provide quarterly reports to inform government policy. Instruction is for 3 years. This report is his tenth report under the direction of the Secretary of the Treasury.
