ACCC blames Qantas and Virgin Australia duopoly for high flight prices and poor service

The Australian Competition and Consumer Commission (ACCC) has taken aim at Australia’s domestic airline industry, blaming a lack of competition for the current high prices and poor customer service across the sector.

Service goes down, prices stay up

According to the report, released on Monday, the latest rate of flight cancellations and delays within Australia have worsened compared to long-term industry averages.

In April, airlines cancelled 3.9% of flights, with Jetstar performing the worst at 8.1% — more than double the rate of other airlines.

The airline industry also reported that only 71.8% of its flights arrived on time in April, with Jetstar coming in at 59.7%.

Despite these issues, ticket prices have remained high. According to the report, the average return price for economy-class international airfares from Australia was $1827 — an increase of 51% compared to 2019 when it sat at $1213.

However, as the ACCC notes, jet fuel pricing has reduced by almost half since it peaked in June 2022.

“The downward trend in the price of jet fuel should enable the airlines to pass on more savings to consumers in the months ahead,” ACCC Chair Gina Cass-Gottlieb said in a statement.

ACCC says that Qantas and Virgin Australia have a duopoly

The report also highlighted the duopoly between Qantas and Virgin Australia contributing to high prices and underwhelming customer service.

As we have seen over the last couple of years, both business and leisure customers have reported continued issues with flight delays and cancellations, the inability to use flight credits, and lost or damaged baggage.

As a result, travellers have had to take it upon themselves all the more to ensure that their belongings are at least covered at a time when issues are occurring more.

“In the last couple of years, we’ve seen record numbers of airline cancellations and issues with lost luggage. This is what makes travel insurance so important right now. It can really help with the costs of these unexpected travel mishaps,” Jessica Prasida, travel insurance expert at Finder, said in an email to SmartCompany.

According to the report, the two airlines flew 94% of all domestic passengers during the month of April.

“Domestic aviation is one of the most concentrated industries in Australia, barring only natural monopolies such as electricity grids and rail networks,” Cass-Gottlieb said.

“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.”

The report did highlight the launch of Bonza, as well as the expansion of Rex, as potentially offering further competition in the future. However, they have a very small share of the market

“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,” Cass-Gottlieb said.

“While our airline monitoring direction is ending, we’ll continue to watch for anti-competitive behaviour and unfair business practices in the airline industry. If we see evidence of this occurring, we will use our full range of enforcement powers to achieve compliance with the law.”

The report also highlights that new airlines around the world have historically struggled in response to “aggressive” competition from incumbent airlines.

In the case of Rex and Bonza, offering comparatively few services and flight routes compared to Virgin and Qantas is a road block to expansion and thus, more competition.