This week was a treasure trove for lovers of data-based journalism and aviation – I very much include myself as part of that group, as niche as it may be. Spoiler alert – it’s probably not that niche.
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Like one of my kids raiding the cupboard for food just before dinner, I took a somewhat premature look at the results. All I’ll say is that I am hedging my bets a Weekly Wrap focusing on aviation and mixing in data and industry research will likely gain a few readers.
Over the last 10 days, there were two key data drops. On Monday, the ACCC delivered its Domestic Airline Competition Australia report for May, while on late Friday last week (so on a technicality we will count it as this week’s news as we couldn’t report on it until this week), BITRE released its latest airfares data.
The lazy headline was that Qantas and Virgin Australia had recorded impressive first-half profits and competition was down. As per the ACCC report; “Half-year financial results show that both the Qantas Group and Virgin Australia are benefiting from strong demand for flying and minimal competition in the domestic airline sector”.
“Benefitting” from “minimal competition” was an interesting way to describe it in the context of the great debate around whether Australia can support a proper third player. Market size would suggest it’s not that simple. History would suggest it’s not possible.
The pair would only genuinely be “benefitting” from “minimal competition” if the market size were, beyond reasonable doubt, large enough to support more than two major players. Otherwise, the market is simply an appropriate size for two major players.
Strong demand can be accounted for by a peak period. As we know, that peak has now dropped off.
Moving on from semantics, Qantas Group released its financial results for the first half of 2024/25 in February, announcing underlying earnings before interest and tax (EBIT) of $916 million for its domestic operations and $1.5 billion for its whole operations.
This was an 11.9% increase from the first half of 2023-24 for its total operations.
Virgin Australia has been largely mooted to want to float quicker than one of its Boeing 737s trying to land in a mayday situation. It hasn’t yet, so it doesn’t have to make public its results, but prior to stepping down, Jayne Hrdlicka stated the airline had achieved record profits for H1 24/25.
So, the assertion that both players are making good coin is certainly correct.
There was a caveat in that. The BITRE statistics, which came out prior to the ACCC report, showed that airfares, both in business (dominated by Qantas and with the ever-present feather in the cap of its loyalty program that has frequent business travellers happily paying far over the odds for those valuable status points) and economy, had actually dropped in the most recent recorded months.
This occurred across all measured categories – business, restricted economy, and best discount.
BITRE provided graphs for business, restricted economy and best discount categories on a CPI-adjusted basis individually. For ease of illustration, I have pulled the data from its spreadsheet and plotted them all on a single graph.
Of course, there is some seasonal adjustability to account for, but it is only this year that the stats have shown all three categories take fairly substantial dives at the same time.
It is worth noting that those dives are both after REX went into administration – in other words, in a two-major-player market.
If you’re wondering what the numbers on the side relate to, it’s not dollar value (that would position business as fantastic value if it was).
To quote BITRE, “The series is a price index of the lowest available fare in each fare class, weighted over selected routes. It does not measure real airline yields, or average fares paid by passengers”.
What does this mean for the future? Can a two-player market sustain price competitiveness?
The general consensus seems to be “yes”, if thoughts from a few of the attendees at the Sydney Airline Leadership Forum on Thursday were anything to go by.
One of Australia’s premier AV experts, Peter Harbison, took to the stage and addressed just such a question while he was discussing the situation with Virgin Australia – to IPO or not to IPO?
“The underlying theme for government regulation over the last 60-70 years has been attempting to make sure there is not a monopoly, let alone a duopoly…this [Qatar’s stake in Virgin Australia] I think now maintains for the future a stable duopoly, and whether we have another entrant is another issue,” Harbison said.
He noted that what has happened on an economic and political front in the US has ruffled the investment market as the risk has gone up with the current uncertain climate.
“Just in the last few days it [the risk] has come down to a certain level that investment advisors think is acceptable and I think probably it [the IPO] will get away in the next couple of months.”
So where does that leave us on fares moving forward? Harbison illustrated that Qantas is still able to charge a significantly higher airfare, according to the statistics he pulled, but it has also left VA in an interesting position – a position that, at times and depending on the route, saw it charge less than Jetstar, let alone Qantas.
Consensus among some of the delegates was that as VA continued to look towards an IPO, it will likely do nothing to destabilise its current healthy situation, but once it lists, it could present the airline with an opportunity to become more aggressive.
What has the ability to shape whether it does or not? As ever, demand, which is currently soft.
As per BITRE, “There were 4.67 million passengers carried on Australian domestic commercial aviation (including charter operations) in February 2025, compared with 4.93 million in February 2024 (down 5.2 percent). This is also a decrease of 0.6 percent on pre-COVID February 2019 passenger numbers (4.70 million).
To round the corner and complete the lap, as it were, competition may be “down”, but in the context of the Australian domestic aviation industry, it is fluctuating within normal parameters in terms of maintaining two major players, and currently, this is not negatively impacting airfares.
The rest of the week
It was a week featuring Webjet again and the back and forth between Helloworld and BGH Group as to which one looked most likely to purchase the recently demerged, listed business.
Early advantage last week for BHG vanished after the 80c per share offer was knocked back, generally being seen as low, while Monday then saw Helloworld reportedly purchase a greater stake in the business.
This week Webjet released its latest results – cost-of-living pressures and a softer domestic travel market had seen Webjet Group bookings drop by 7% to 1.53 million for the year to 31 March when compared to the previous 12-month period.
Meanwhile, famed industry leader Tom Manwaring announced he would retire from his role as CEO of ETG, effective 30 June.
As a result of this change, General Manager Sales & Marketing at ETG, Jason Aghan, will replace Manwaring in the role as Group General Manager effective 01 July, with all ETG senior management reporting to him.
In cruise news, Cruise Lines International Association’s (CLIA) annual State of the Cruise Industry report for this year shows the sector set records in 2024, including 34.6 million people taking an ocean cruise worldwide.
A total of 37.7 million are expected to cruise this year – which still represents less than 3% of global tourism.
MSC looks like it wants to capitalise on that – it signed an order for two new World-class ships to complement the four already delivered or under construction for the line.
Of course, there was plenty more news going around, so if you’re in Sydney and likely trapped inside on a rainy weekend, or anywhere else enjoying (hopefully) a bit of sunshine, why not catch up on the past week’s newsletters in your inbox?
Enjoy the weekend wherever you are,
Damian
