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In a stark warning to policymakers, the Australian Competition and Consumer Commission (ACCC) has sounded the alarm on the urgent need for reforms within Australia’s aviation sector. The ACCC’s latest report on Domestic Airline Competition reveals that the current market landscape could soon lead to skyrocketing airfares and reduced travel options, making immediate public-policy interventions essential.

The ACCC’s findings underscore competition’s pivotal role in keeping airfares affordable. When Rex Airlines launched operations on several intercity routes in 2021, the impact on prices was both immediate and profound. The report shows that average fare on these routes plummeted by approximately 25%, indicating increased competition drives down consumer costs.

However, the recent turbulence in the aviation sector—marked by the collapse of Bonza and Rex’s withdrawal from several key routes—poses a significant threat to this competitive dynamic. The ACCC warns that with no route featuring more than two competing airline groups, travellers will likely face higher prices and fewer choices in the near future. This alarming trend highlights the fragile competition in the domestic aviation market, particularly on routes previously served by multiple carriers.

The report further reveals that, since February 2023, routes with heightened competition have consistently reported lower average revenue per passenger than the broader domestic network. This correlation between competition and lower fares, especially on major city routes, reinforces the necessity of a robust, competitive environment in safeguarding affordable air travel for Australians.

Dean Long, CEO of the Australian Travel Industry Association (ATIA), has advocated for regulatory reforms to address these challenges. “The ACCC’s ongoing monitoring of the domestic aviation industry provides timely and independent insights into aviation competition in Australia,” Long stated. “This is a key reason why ATIA advocated for the return of these reports.”

Long further emphasized the need for comprehensive reforms, stating, “The ACCC’s most recent report reinforces that Australia needs ongoing improvements to the way competition works in aviation. ATIA continues to call for reforms to deliver better outcomes for traveling Australians and the many travel businesses that support them.”

The ACCC report also suggests that reforms to Sydney Airport’s slot allocation scheme could have provided a lifeline to embattled carriers like Rex, potentially bolstering competition. However, the ACCC notes that such measures would only address part of the broader issue, implying that a more holistic approach is required to ensure a competitive and vibrant aviation sector.

As the Australian aviation industry faces unprecedented challenges, the need for decisive action has never been more critical. The ACCC’s findings should serve as a wake-up call to policymakers, urging them to implement reforms that will preserve competition, protect consumers, and maintain the vitality of Australia’s air travel industry.

Without these necessary reforms, the future of affordable and accessible air travel in Australia hangs in the balance. The stakes are high, and the time for action is now.