The Australian Competition and Consumer Commission (ACCC) warned that both Qantas and Virgin Australia have too much of a foothold on the domestic airline market, with new entrants needing to grow significantly to stop the two from taking further hold of the market.
According to the ACCC, over the past two decades 90% of domestic air passengers in Australia traveled on Qantas Group (Qantas and Jetstar) or Virgin Australia aircraft. The number grew to 94% in April 2023.
“Domestic aviation is one of the most concentrated industries in Australia, barring only natural monopolies such as electricity grids and rail networks,” said Gina Cass-Gottlieb, the chair of the ACCC. “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.”
Cass-Gottlieb added that while Rex Airlines’ expansion on major city routes and the launch of low-cost carrier Bonza have been positive developments, “their share of the market is small and there are barriers to growth”.
Calling for reforms in the Australian market
The ACCC called for legislative changes that would improve the passenger experience while traveling within Australia.
Firstly, the commission wants to change the way peak-time slots are allocated at Sydney Airport (SYD), which it said would be “the best way to promote competition in the domestic airline industry”.
“Access to peak time slots at Sydney Airport is critical for new and expanding airlines seeking to build an intercity network. Without legislative reform to the airport’s demand management scheme there will not be any material improvement in domestic airline competition in Australia in the foreseeable future,” Cass-Gottlieb continued.
The ACCC noted that a government-led review identified several possible reforms that would change the way slots are allocated at SYD, the country’s busiest airport.
The worsening customer service standard was another issue identified by the ACCC, with Cass-Gottlieb highlighting that Australia needs a “truly independent and external dispute resolution ombuds scheme, which has the power to make binding decisions”.
Additionally, the ACCC said that it “strongly advocated” for more protection for passengers in case of a flight cancelation or delay, making it “illegal for businesses to fail to provide a remedy for consumer guarantees failures”.