Federal Government Gives Rex Airline AU$80 Million Lifeline As Its Collapse Sees 13% Increase In Airfares

Consumer watchdog Australian Competition and Consumer Commission (ACCC) has revealed that following the collapse of regional carrier Rex, the aviation industry became more concentrated, with fewer players dominating the market, contributing to a more than 13% increase in airfares on all major city routes.

ACCC's report came as the federal government pledged AU$80 million to help rescue Rex. EY administrator Sam Freeman stressed that this financial backing from the federal government was crucial for regional communities, as it would support vital routes and protect local jobs, ABC News reported.

Rex suspended operations on 11 routes and entered administration in July, after which the airfare, including economy and discount rates, on all major city routes saw a huge spike in the quarter to September, according to the latest domestic airline monitoring report by ACCC.

While economy rates on Adelaide-Melbourne jumped by 95% to AU$296, Melbourne-Gold Coast was up by 70% to AU$432, and Canberra-Melbourne rose by 54% to AU$298, The Guardian reported.

The best discount airfares on several holiday routes also increased, with the cost of Canberra-Gold Coast tickets rising by 171% in the quarter to AU$490, Brisbane-Hamilton Island up by 122% to AU$871 and Cairns-Sydney rates were up by 43% to AU$380.

All these routes were previously serviced by Rex.

According to ACCC commissioner Anna Brakey, the 13% average increase in airfares was attributed to the collapse of low-cost carriers Rex and Bonza's jet operations in 2024, which had led to a "less competitive domestic airline sector." "This in turn has contributed to higher airfares," she said.

Though jet fuel prices fell by 41% in the 12 months leading up to September, domestic airfares have remained stable. In contrast, average international airfares from Australia decreased by 5-10% during the same period, the ACCC stated quoting data by Flight Centre.

ACCC's latest report also revealed that flights remained full as the seats on capital city routes were decreased by 6%.

By November, domestic routes had become largely dominated by the two major airline groups -- Qantas Group (including Jetstar) and Virgin Australia -- accounting for 98% of domestic flights. At the start of the year, almost 50% of passengers flew on routes operated by three or four airline groups, as reported by the ACCC.

"The domestic airline industry has become even further concentrated, and it may be some time before a new airline emerges to compete on popular services between metropolitan cities, with normal barriers to entry and growth exacerbated by aircraft fleet supply chain issues and pilot and engineer shortages," Brakey said.

Denying any surge in the price index, Qantas attributed the increase in airfares to heightened demand caused by a Coldplay concert in Melbourne, which it claimed had artificially driven up advertised prices, reported ABC News.

"It is a snapshot of the lowest fares available to purchase on a particular day three weeks prior to travel and does not factor in events which may impact demand and fares," Qantas domestic CEO Markus said.

Svensson also told a Senate committee on Tuesday that the company did not expect the government's proposed reforms aimed at boosting competition at Sydney Airport to impact its dominance over the airport's landing and takeoff slots.

The committee is reviewing feedback on reforms suggested by the Labor government in February, aimed at changing laws that currently limit Sydney Airport to 80 takeoff and landing movements, or slots, per hour.