ACCC to monitor Qantas, Virgin Australia airfares

Australia's consumer watchdog will keep an eye on domestic fares and capacity for the next three years.

By David Flynn, June 19 2020

ACCC to monitor Qantas, Virgin Australia airfares

The Australian Competition and Consumer Commission (ACCC) will "monitor prices, costs and profits" of domestic air travel over the next three years, alongside its current watch on car parking at Australia’s four major airports.

The move comes as Qantas ramps up its domestic flying and unleashed a sale spotlighting Jetstar fares as low as $19 on major routes including Sydney-Melbourne, while Virgin Australia remains in administration as potential owners circle the failed airline.

“A sufficient level of competition provides consumer choice, and helps to maintain service levels and keep prices down over the long term,” remarked ACCC Chair Rod Sims, adding that "a strong aviation industry is vital for Australian consumers and the economy more broadly, and for our way of life."

At the centre of the ACCC's radar will be "early signs of damage to competition in the domestic airline industry which could harm the long-term interests of consumers," which could then be "quickly acted on by the ACCC and/or provided to the Government."

A close eye on capacity

A particular focus will be on the practice of adding excessive amount of seats onto certain routes – either as more flights or by using larger aircraft – "in an attempt to damage a competitor or drive them off the route," the ACCC noted.

This harks back to the height of the battle between Qantas and Virgin Australia, when in March 2013 then-Qantas Domestic CEO Lyell Strambi said he would add two planes for each one which Virgin put onto any route in order to protect Qantas' 65% market share.

"We've made it very clear we'll be sensible in terms of capacity," Strambi said at the time." But if a competitor puts one (plane) in, we'll put two in as a group. We're not about to move aside and let anybody walk into our markets without a competitive tussle."

Qantas also draw attention by putting a Boeing 747 jumbo jet on the Sydney-Perth route shortly after Virgin launched its new Airbus A330 'Coast to Coast' service, flooding the premium transcontinental route with hundreds of additional seats per day.

Today, both Qantas and Virgin are suffering from the after-shock of the coronavirus pandemic and see the reopening of state borders and the easing of travel restrictions as a welcome chance to get back in the air.

“We have a lot of aircraft on the ground with fixed costs attached to them, so if we can put some of them back in the air by offering special fares, it’s a positive for us, for our people, for tourism and for consumers," explained Qantas Group CEO Alan Joyce, in relation to this morning's Qantas sale.

In announcing the ACCC's new brief, Federal Treasurer Josh Frydenberg said "a key matter covered will be the level of capacity the airlines are putting on each route and whether this is occurring in a way that may damage competition."

Frydenberg also said the ACCC would "provide another avenue for those wishing to raise concerns about anti-competitive conduct in the domestic air passenger sector."

The airlines respond

“Australia’s aviation sector is extremely competitive and all indications are that it will remain that way," Qantas said in a media statement this afternoon.

"What the ACCC can expect to find through its monitoring in the near term is Qantas and Jetstar flying its domestic aircraft to generate cash rather than leaving them on the ground costing money. This is good news for consumers because it means lower fares, good news for tourism because it will stimulate travel demand and good news for our people because it means more work.”

A Virgin Australia spokesperson said the airline "welcomes new monitoring to help ensure Australia’s aviation sector remains competitive, particularly as we move to increase flights as travel restrictions ease."

"Maintaining a competitive aviation sector is important for consumers, Australian tourism and the country’s economic recovery post COVID-19."

Also read: Qantas, ACCC clash over refunds for cancelled flights