Pricing data used this week by the ACCC to shine a spotlight on rising domestic airfares is erroneous and doesn’t reflect prices actually being paid, Qantas Domestic CEO Markus Svensson has said.
Svensson came out swinging after the competition watchdog’s latest Domestic Airline Competition showed average airfares on major city routes had increased by 13.3% in the two months from Rex entering administration on 31 Jul through to 30 Sep.
The data purported that fares between metropolitan cities climbed following the departure of Rex from 11 of Australia’s 23 domestic routes between major capital cities.
However, Svensson said the report doesn’t accurately reflect real prices and only takes a snapshot of the lowest-available fares three weeks out from an arbitrary date.
“The day selected in the latest report was 31 Oct, which is when Melbourne was hosting Coldplay,” Svensson said.
“As such, demand was significantly higher on flights into Melbourne which means lower fares were snapped up early and the fares left available to purchase three weeks out were higher than usual.
“The average fare increase on these routes between Jul and Oct was significantly lower.”
Svensson also pushed back on ACCC claims the number of available seats on a route dropped 6% while passenger numbers remained the same, leading to the cheapest fares selling more quickly and flights being fuller.
“If you look at fares in July to September this year compared to the same period last year, airfares across the industry have increased broadly in line with inflation,” Svensson said.
“These increases were occurring while Bonza and Rex were still operating on domestic routes.”
From a sector snapshot taken earlier this year, nearly half of all domestic passengers flew on routes with either three or four airlines, with the Melbourne to Gold Coast route among the most competitive in the country with four airlines competing.
Currently, there is no domestic route served by more than two airlines, with Qantas and Virgin Australia together accounting for 98% of the domestic market.
“On routes where there are capacity reductions, there will generally be less lower fares available and we are looking at how we can add more capacity where we can,” Svensson said.
ACCC Commissioner Anna Brakey said the spike in airfares corresponds to a less competitive domestic airline sector.
“While we also typically see a seasonal peak in air travel in September due to major sporting events and school holidays, there were additional pricing pressures this year,” Brakey said.
“Passengers were no longer able to access the lower fares that Rex offered, and airline seating capacity decreased following Rex’s exit.
“This in turn has contributed to higher airfares,” Brakey added.
