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Virgin picks up market share as travellers return to the air

Business

The return of interstate travel has lifted Virgin’s market share from 20 per cent to 24 per cent, but the industry was still at only 41 per cent of its pre-pandemic capacity, according to a report from the Australian Competition and Consumer Commission.

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The ACCC said the entry of Rex to domestic routes had already had an impact on the price of tickets.

The ACCC said Rex’s $49 fare between Sydney and Melbourne forced Virgin to match it while Jetstar introduced a $29 fare.

It said Rex’s business model appeared to closely match that of Virgin’s.

It also found that in December, discounting was occurring when normally prices would rise and business fares in December were cheaper than they were in 2016.

“The lack of fare increases in December suggests the airlines are pricing their cheapest offers more competitively in a bid to encourage people to fly again,” the ACCC said.

The ACCC said the Government’s support package for the aviation sector was due to run out in September.

“We understand that a number of routes remain unprofitable and the extension of these programs is likely to ensure their retention, at least in the short term,” the report said.

It said the three airlines were opening and closing routes as they tried to find a workable business model. Border closures had also forced the airlines to look at intrastate routes and Australians had different travel preferences compared with the international travelers they have replaced.

The ACCC also dismissed claims from Rex that Qantas was engaging in predatory behaviour in relation to routes.

It said the domestic aviation industry recovered “at an accelerating rate” through the December quarter and reached 2.2 million monthly seats, about 41 per cent of the pre-COVID level, up from 13 per cent in the September quarter. Monthly capacity in December was 3.4 million seats.

While the “golden triangle” of Sydney-Melbourne-Brisbane was storming back in December, Brisbane to Cairns and Brisbane to Townsville were among the busiest in December. The Brisbane – Cairns route was the busiest outside the golden triangle which the ACCC said was a sign of people increasingly traveling locally.

“The impact of Covid on the aviation industry has also created opportunities for Rex, such as the increased availability if aircraft and pilots to expand its domestic network, the ACCC said.

“In competing in the major city routes, a key consideration for Rex will be access to take-off and landing slots at Sydney airport. rex has secured slots until October 2021 and is seeking to retain slots beyond this time.”

 

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