Delta outbreak “halted” Australian airline recovery, ACCC reports

Delta outbreak “halted” Australian airline recovery, ACCC reports

For the first time in recorded history flights in and out of Sydney Airport (ASX: SYD) were not in the monthly top 10 busiest Australian routes in July as the COVID-19 Delta outbreak brought the domestic airline industry to a standstill.

According to the Australian Competition and Consumer Commission’s (ACCC) latest Airline Competition in Australia report, passenger numbers in July 2021 plunged to 23 per cent of pre-pandemic levels.

For comparison, the domestic travel sector had somewhat recovered in April 2021 and was operating at a peak of 68 per cent of pre-pandemic levels.

The ACCC’s report also expects passenger numbers for August and September 2021 to be even lower than those recorded in July.

“The Delta outbreak has hit the domestic airline industry hard, and it has unfortunately halted the airlines’ recovery just as they were starting to approach pre-pandemic levels of flying,” ACCC chair Rod Sims said.

Qantas (ASX: QAN), Jetstar, Virgin and Rex combined were forced to cancel one in three flights in July 2021, which is the highest cancellation rate since April 2020.

Weekly passenger numbers in Victoria fell 91 per cent from mid-May to early June, and in NSW they dropped 97 per cent between mid-June and the end of July.

The ACCC notes that routes in and out of Sydney Airport were not in the top 10 busiest routes in July 2021, despite it normally being Australia’s busiest airport.

Instead, intra-state Queensland routes were the busiest, with Brisbane to Cairns, Townsville and Mackay among the most popular.

“With many state borders closed, those that could fly were doing so closer to home,” Sims said.

“July was the first time that Sydney hasn’t been among the 10 busiest routes in the country, which is a sign of the state of the industry.”

The report also details how the ACCC has heard concerns from some airlines that airports are looking to increase charges in order to recover lost profits from the pandemic - actions that would be inconsistent with the Australian Government’s Aeronautical Pricing Principles.

“We would be very concerned if the major Australian airports sought to use their monopoly position to charge airlines excessive prices in order to recover any lost profits from the pandemic,” Sims said.

“This could limit an already vulnerable sector’s ability to recover, and impact on both consumers and the economy.”

Updated at 11.37am AEST on 29 September 2021.

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