New data from the Bureau of Infrastructure and Transport Research Economics (BITRE) shows that while airfares have dropped and discounts increased since Christmas, prices remain elevated amid rising demand and lower network capacity.
The data comes as the competition watchdog put the sector on notice in late 2022, indicating it would be watching domestic carriers to ensure extra seats and flights were being added in a bid to bring down airfares which hit a 15-year high in December.
The COVID pandemic had an undeniable effect on the supply-side of airlines with issues arising in both staff levels and capacity on flights, leading to airfares being 27 per cent higher than 2019.
BITRE’s ‘best discount airfare’ index dropped from 112 points in December to 74.5 in January, with the higher point score indicating higher airfares. However, prices are still much higher this month than the same time last year where the index read 54.1 points.
The Australian domestic market is dominated by the Qantas group (including Jetstar) which make up about 60 per cent of the market, Virgin Australia hold roughly 33 per cent and Regional Express 5 percent.
Bonza airlines has officially been cleared to fly as of last week and some believe it has the potential to shake the domestic industry.
“Bonza’s low-fare model could drive down the cost of its competitors airfares down, at least in the short term,” said Doug Drury, head of aviation, Central Queensland University.
“It could be quite a challenge to turn that into a profitable operation. But they are going after a niche market, and if they do that well, it will force change with REX and Virgin and Qantas.”
