(Bloomberg) -- Airfares between Australia’s major cities have surged following the collapse of regional carrier Rex, with prices on one route almost doubling, the nation’s competition regulator said.
Rex entered voluntary administration on July 30 after a failed attempt to muscle in on capital city routes, which are dominated by Qantas Airways Ltd., its budget unit Jetstar, and Virgin Australia Airlines Pty. Those two companies now carry 98% of domestic passengers, and there’s no domestic route serviced by more than the two major airline groups, the Australian Competition & Consumer Commission said in a report Tuesday.
“The exit of Rex as a third competing airline group on services between metropolitan cities may have significant longer-term impacts on the domestic aviation sector,” ACCC Commissioner Anna Brakey said in the report.
“The domestic airline industry has become even further concentrated, and it may be some time before a new airline emerges to compete on popular services between metropolitan cities, with normal barriers to entry and growth exacerbated by aircraft fleet supply chain issues and pilot and engineer shortages,” she said. “With less competition, there is less choice for consumers and less incentive for airlines to offer cheaper airfares and more reliable services.”
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Average airfares between major cities jumped 13% following Rex’s collapsed, but there were even more pronounced spikes on some routes. For instance, “best discount economy” tickets between Adelaide and Melbourne soared 95% to A$296 ($195), while fares from Melbourne to the popular Gold Coast holiday region climbed 70% to A$432.
Qantas said the ACCC’s data doesn’t reflect average fares customers are actually paying, and rather is only a snapshot of the lowest fares available for purchase on a particular day three weeks prior to travel.
On the day selected in the latest report, rock band Coldplay was performing in Melbourne, “which means lower fares were snapped up early and the fares left available to purchase three weeks out were higher than usual,” Qantas Domestic Chief Executive Officer Markus Svensson said in a statement.
(Adds Qantas comment in seventh paragraph.)
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