Collapse of Rex Sees Domestic Airfares up by as Much as 95 Percent: ACCC

The collapse of Rex Airlines has seen contributed to the soaring price of airfares in recent months.

Two passengers walk past a Qantas jet at the International terminal at Sydney Airport in Sydney, Australia, on March 10, 2020. Mark Evans/Getty Images

The Australian Competition and Consumer Commission (ACCC) report has found a lack of competition in the country’s domestic aviation industry has driven up the price of airfares, in some cases by as much as 95 percent.

The most recent Domestic Airline Competition report shows that since Rex Airlines suspended its metropolitan routes, passengers have been paying significantly more to travel.

Data in the latest findings shows that from July—when Rex called in the administrators—to October, economy class airfares skyrocketed in price.

The Adelaide to Melbourne route was impacted by a 95 percent price rise to $296, while tickets from Melbourne to the Gold Coast went up 70 percent to $432.

The Canberra to Melbourne route increased 54 percent to $298.

The price index for best discount airfares also increased significantly on other routes including Canberra to the Gold Coast which saw a 171 percent rise to $490, Brisbane to Hamilton Island with a 122 percent increase to $871, and Cairns to Sydney which grew 43 percent to $380.

Data also shows prices have increased on business class and restricted economy airfares.

“The recent spike in airfares corresponds with a less competitive domestic airline sector after Rex’s exit from 11 of the 23 services between metropolitan cities,” ACCC Commissioner Anna Brakey said.

“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.

“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.”

Findings also show that since July, the number of seats on services between metropolitan cities fell by 6.0 percent, while the number of domestic passengers travelling on these routes remained relatively stable, which led to fuller flights.

Earlier this year, almost half of all passengers flew on routes with either three or four airline groups.

Currently, there is no domestic route serviced by more than two major airline groups, with Qantas Group and Virgin Australia servicing 98 percent of domestic passengers, the findings revealed.

“The exit of Rex as a third competing airline group on services between metropolitan cities may have significant longer-term impacts on the domestic aviation sector,” Brakey 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.

“With less competition, there is less choice for consumers and less incentive for airlines to offer cheaper airfares and more reliable services.”

According to experts in the industry, numerous factors come into play when it comes to emerging airlines breaking through.

Some of the factors include fuel prices, labour costs, and intense competition in securing airport slots—allotted times for airlines to land and take-off.

As a result, several emerging budget airlines have failed to thrive in recent decades, more recently with Bonza folding and Rex in voluntary administration.

Need to Reform Flight Slots

The ACCC says flight slots have remained a significant barrier to competition in the industry, with proposed reforms for Sydney Airport involving penalising airlines who have been accused of deliberately cancelling services in order to maintain valuable slots at terminals.

On Nov. 12, a Senate inquiry saw Qantas executives accused of misusing airport slots, with the carrier denying the claims.

“We do not apply for slots without having intention to operate them ... we categorically deny that we slot hoard and try any games,” said Qantas Domestic CEO Markus Svensson.

Matthew Shroder, from the ACCC, said the level of competition at Sydney Airport was “less than we would like.”

“Sydney’s the main international gateway, but it’s also the main domestic gateway to a lot of routes. So access to Sydney is critically important,” he told the hearing.

“That’s why we support the reforms for the slot regime, because we think that will be more competitive.”

Sydney Airport Chief Executive Officer Scott Charlton said the current rules were contributing to problems.

The opening of the Western Sydney Airport is expected to alleviate the problem of several airlines competing for the limited slot capacity at Australia’s busiest airport, which also has a curfew that caps its operational hours.

“Currently, Sydney West Airport is scheduled to open in 2026, and that will eliminate the issue of Sydney shutting down operations at 11 p.m. due to a curfew,” CQU aviation expert Doug Drury told The Epoch Times.