A new report released on Monday revealed that Australia’s domestic airline industry is still at a high level of concentration with its service reliability remaining relatively poor.
According to the report conducted by the Australian Competition and Consumer Commission (ACCC), as one of the most concentrated industries in the country, the domestic airline sector has long been characterized as a duopoly, reports Xinhua news agency.
Despite the fleet expansion of Rex and the entry of new low-cost airline Bonza, there is still a lack of effective competition to the Qantas Group (including Jetstar) and Virgin Australia.
Data from the report indicated that over the last 12 months, the two largest airline groups accounted for around 95 per cent of the domestic passenger market, and in April this year, they flew 94 per cent of all passengers.
“The lack of effective competition over the last decade has resulted in underwhelming outcomes for consumers in terms of airfares, reliability of services and customer service,” the ACCC noted in the report.
The national competition regulator found that domestic passenger and capacity figures have not managed to reach pre-pandemic levels.
About 4.6 million passengers flew in April this year, reaching 92 per cent of the level in April 2019.
More recently, pent-up demand for leisure travel is beginning to ease, with rising cost-of-living pressures pushing consumers to become more price sensitive.
The ACCC pointed out that this easing of demand is evident in the fall in airfares, as the price of discount airfares decreased by 14 per cent in real terms between February and May this year.
However, the latest rates of flight cancellations and delays have gotten worse and remain poor compared to long-term industry averages.
The industry cancelled 3.9 per cent of flights in April this year, compared to the long-term average of 2.1 per cent.
Only 71.8 per cent of flights arrived on-time, which is below the long-term average of 81.5 per cent.
“Without a real threat of losing passengers to other airlines, the Qantas and Virgin Australia airline groups have had less incentive to offer attractive airfares, develop more direct routes, operate more reliable services, and invest in systems to provide high levels of customer service,” said ACCC Chair Gina Cass-Gottlieb.
“Rex’s expansion onto major intercity routes and Bonza’s launch have been positive developments for competition, but their share of the market is small and there are barriers to growth.”
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