ACCC reveals 56 per cent spike in airfares, signals return to pre-pandemic capacity on the horizon

A new report from the nation’s consumer watchdog reveals that domestic airfares soared 56 per cent between April and August – hitting their highest price point since late 2020 – as airlines reduced their capacity to manage staff shortages and rising jet fuel costs.

The Australian Competition and Consumer Commission (ACCC) notes that as economy fares rose sharply from their 11-year record low in April, airlines also produced their worst on-time performance on record, cancelling flights at a rate over three times the long-term average.

According to the report, 4.7 million passengers travelled in July – the highest since early 2020. During the peak period, 82 per cent of airline seats were filled compared to pre-pandemic levels (79 per cent).

Planes were more than 90 per cent full on many routes headed to northern Australia, with hot destinations including Cairns, the Gold Coast and Darwin.

However, the airline industry reported half of flights arrived late, while 6.4 per cent were cancelled due to workforce shortages and ill staff. High jet fuel costs and decisions to cut capacity continue to put upward pressure on airfares.

ACCC Chair Gina Cass-Gottlieb said competition between airlines is incredibly important to maintain pressure on ticket prices and service levels across the industry.

“After about 18 months of historically low airfares, the cost of domestic flying has risen sharply in response to strong demand, temporary capacity reductions and very high jet fuel prices,” Cass-Gottlieb said.

“We are aware that for many consumers, long-awaited travel fell well short of expectations with record delays, very high rates of cancellations, lost baggage, and long wait times for call centres.

“We have been engaging closely with airlines to understand the source of these problems.”

According to the ACCC, airlines have advised the consumer body that on-time performance has improved more recently as rates of sickness subside, the industry recruits more people and airlines reduce the number of scheduled flights.

Rex performed significantly better than other airlines in terms of punctuality and the rate of cancellations, attributing the success to retaining staff despite reduced flying over the last two years.

Qantas (ASX: QAN) carried 39 per cent of passengers in July, followed by Virgin (33 per cent), Jetstar (23 per cent) and Rex (ASX: REX) (5 per cent).

Qantas and its subsidiary Jetstar combined carried 62 per cent, slightly less than in April.

The ACCC said pre-pandemic capacity should return over the coming months as airlines and airports continue to recruit staff and rebuild their capabilities.

“We expect that airlines will be honest and proactive in communicating to passengers the reasons why a flight is delayed or cancelled, how the consumer guarantees apply, and what other compensation they are entitled to,” Cass-Gottlieb said.