• Wed. Sep 21st, 2022

Australia’s domestic airline industry nears full recovery, but jet fuel prices hit record high

ByKimberly A. Brochu

Jun 9, 2022
Australian regional carrier Rex is strengthening competition with Virgin Australia and Qantas. (PHOTO: Rex)

www.txtav.com/jetsThe number of passengers in Australia traveling domestically in April 2022 was the highest since the start of the pandemic, but jet fuel prices have reached record highs and air fares are expected to rise in the coming months, according to the latest Air Competition in Australia published by the Australian Competition & Consumer Commission (ACCC).

The quarterly report shows 4.5 million passengers flew on Australia’s domestic airlines in April, 89% of pre-COVID levels. “After two very difficult years, it looks like the domestic airline industry is approaching a full recovery,” said ACCC Commissioner Anna Brakey.

Flights to Queensland holiday destinations were particularly popular in April. Passenger numbers on Canberra – Gold Coast have reached 193% of pre-COVID levels, and passengers traveling between the Gold Coast and Melbourne, Adelaide and Sydney have also exceeded the pre-pandemic average.

The aviation industry welcomed the return of passengers during the busy Easter period, but on-time departures fell to 62%, their lowest point ever, due to labor shortages related to COVID and staff absences. “Airlines and airports benefited from strong demand over Easter, but the combination of high passenger numbers and staffing shortages created operational challenges for them,” Brakey said.

Airlines are now forecasting a sustained recovery in domestic travel, but record fuel prices are driving up airfares and forcing airlines to revise their capacity forecasts. Monthly jet fuel prices hit a record high in May. Qantas later revised down its capacity forecast from 107% to 103% of pre-pandemic levels for July and August.

However, Virgin, Qantas and Jetstar have said they expect to be flying at or above pre-pandemic levels in the coming months. Qantas also said business travel demand is recovering faster than expected, with small business demand exceeding pre-pandemic levels and large business traffic up 85% in May. “A sustained recovery over the next few years will improve the financial health of the domestic airline industry and help secure the additional competition we are seeing from new and expanding airlines,” Brakey said.

The new “ultra-low-cost” carrier Bonza is expected to launch operations in the second half of 2022 on 27 routes, the majority of which are currently unserved. The ACCC is monitoring the reaction of existing airlines to this new competition, including soliciting information from airlines to understand their strategic responses to Bonza.

Discount airfares briefly hit an 11-year low in late April, following higher prices at Easter. However, airfares are expected to increase in the coming months. “While travelers have benefited from generally low airfares over the past year as airlines encouraged people to get back to the skies, historically high jet fuel prices mean we are starting to see fares rise again. “, Brakey said. “We will monitor the pricing behavior of airlines and look for behavior that could harm competition to the detriment of consumers. This will be increasingly relevant as the industry enters a more stable period following the disruptions caused by COVID-19. »

In April, nearly two million passengers traveled on routes served by the three competing airline groups: Qantas Group (including Jetstar), Virgin and Rex. This figure represented 43% of all domestic passengers, compared to less than 2% recorded in 2019. “We know that passengers are the winners when traveling on routes where the Qantas Group, Virgin and Rex are all competing for customers” , Brakey said. .

While the industry is close to recovery, passengers have taken longer to return to certain routes and airlines continue to review their networks accordingly. Rex withdrew from one of its intercity routes, Sydney-Canberra, at the end of May. It will also leave some regional routes at the end of June when the Australian Government’s Regional Air Network Support Program comes to an end.

The reopening of the Western Australia border has helped Qantas increase its market share. Qantas carried the most domestic passengers in April with 37%, down from 31% in January 2022. Virgin’s share fell to 31% and Rex’s remained stable at 4%. Qantas and its subsidiary Jetstar together carried around two-thirds of all domestic passengers in April 2022.

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