Australian airfares increase since REX collapse

Australia's airline industry is notably a duopolistic one, with Qantas and Virgin Australia controlling 95% of the domestic passenger market. This dominance persists despite numerous attempts by other companies to establish themselves over the years. 2024 has witnessed the notable failures of Bonza and Rex airlines that had sparked hopes for increased competition in the market. Their departure is now showing its expected consequences.

A recent quarterly report by the Australian Competition and Consumer Commission (ACCC) indicates that domestic airfares on major city routes have risen by 13.3% as of September, following Rex Airlines' cessation of capital city services at July's end.

The ACCC's findings also revealed a significant rise in the cost of "best discount economy" tickets on routes formerly serviced by Rex—95% between Adelaide and Melbourne, and 54% between Canberra and Melbourne.

Additionally, the report highlights a decline in fuel prices by over 40% in the 12 months leading up to September, a reduction not reflected in the airlines' pricing strategies. With Australia's limited competition, it appears airfares will continue to be high, driven by increased demand and reduced supply.

For Australian passengers, the only viable solution to achieve lower domestic airfares is increased competition from another airline, although this may seem unlikely in the near future. A new airline starting up in Australia would require substantial financial support to withstand market volatility and must be solely dedicated to its operation.

There is a glimmer of hope with the potential entry of Koala Airlines, which has recently announced its intention to join the market and succeed.

Many customers are likely hoping that Koala will succeed where Bonza and Rex did not. However, Koala's market entry is still some distance away as the airline is in the process of obtaining an Air Operator's Certificate (AOC) from CASA and acquiring a new fleet.

Koala has revealed little about its business strategy, other than offering a cash refund guarantee for passengers and planning to use artificial intelligence to stay competitive in the market.