ACCC keeps vigil as competition rises among domestic airlines

Highlights

  • Rex decides to fly on five busiest routes connecting - Sydney, Melbourne, Brisbane, Adelaide and the Gold Coast by mid-December.
  • Qantas, Virgin, and Jetstar have also declared various new connections on routes that were less travelled earlier.
  • Qantas will fly Newcastle–Adelaide and Wagga Wagga–Brisbane from March 2022.

In its latest Airline Competition in Australia report, Australian Competition and Consumer Commission (ACCC) has revealed that millions of Aussies will be benefitted from increased competition and cheaper airfares on the Country’s busiest routes as border restrictions are lifted and the domestic airline industry gears up for a peak summer period.

The report, released on Tuesday stated that higher optimism among Australian citizens, that state as well as territory borders will remain open, is a reason for renewed confidence to fly, and a preference of four airlines on Australia’s busiest routes seems to be putting downward pressure on the travel charges.

Recently, ASX-listed Rex Airlines (ASX:REX) announced it would add Brisbane to its intercity network by mid-December. This suggests that REX will provide its service on the five busiest routes in Australia. The route connects Sydney, Melbourne, Brisbane, Adelaide and the Gold Coast. Pre-COVID-19, these routes carried more than 22 million passengers each year, comprising over one-third of all Australian domestic passengers annually.

Three more airlines - Virgin (ASX:VAH), Qantas (ASX:QAN) and Jetstar have also declared several new connections on routes that have either never been served, or not served for quite some time. As per the report, Virgin recently kicked off services on Launceston–Perth and Launceston–the Gold Coast, Jetstar will fly Mackay–Sydney from late December, and from March 2022 Qantas will fly Newcastle–Adelaide and Wagga Wagga–Brisbane.

The ACCC is investigating if Qantas’ entry and expansion on specific routes, following expansion by Rex airlines onto intercity routes, give rise to competition concerns. The Competition watchdog will also be in a high alert mode to watch if there are any anti-competitive practices relating to pricing in response to the new competition. The report released today also talks about the profitability of the airline industry over the past 10 years. The Qantas Group, Virgin and Rex collectively faced a loss of more than AU$4 billion over this period.

Meanwhile, QAN closed 3.815% higher at AU$5.170 per share, while the stock REX closed 0.358% higher at AU$1.400 per share on ASX today.

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