ACCC Reports Highlights COVID’s Impact On Australia’s Airlines

Substantial waves of the COVID-19 Delta variant across New South Wales and Victoria over the recent southern hemisphere winter saw most of Australia’s domestic flying come to an abrupt halt. In July, domestic passenger numbers dropped to 23% of pre-pandemic levels.

Recent waves of COVID-19 devastated Australia’s domestic airline industry over winter. Photo: Getty Images

ACCC airlines industry report confirms what is widely known

On Wednesday, the Australian Competition and Consumer Commission (ACCC) released its quarterly Airline Competition in Australia report. The report confirmed what every Australian frequent flyer already knew – the COVID-19 outbreaks have crippled the domestic airline industry.

“The Delta outbreak has hit the domestic airline industry hard, and it has unfortunately halted the airlines’ recovery just as they were starting to approach pre-pandemic levels of flying,” ACCC Chairman Rod Sims said.

According to the ACCC, Australia’s domestic airline industry had recovered to 68% of pre-pandemic levels in April 2021. Some airlines, such as Jetstar, were doing better than that. By July, flying was back to 23% of pre-pandemic levels. The ACCC expects yet-to-be-reported numbers for August and September to be even lower.

Australian domestic air services – July 2019 to July 2021. Source: Bureau of Infrastructure and Transport Research Economics; Australian domestic airline activity. Via ACCC.

Flights from Sydney & Melbourne hit especially hard

The COVID-19 winter outbreaks hit Australia’s two biggest cities (Sydney and Melbourne) and their airports hard. Both cities remain in extended periods of lockdown, and other Australian states have closed their borders to New South Wales and Victoria residents.

As a result, weekly passenger numbers in Victoria fell 91% from mid-May to early June when the first winter COVID-19 wave hit Melbourne. The virus soon found its way to Sydney again. Weekly passenger numbers in New South Wales dropped 97% between mid-June and the end of July.

That saw Qantas, Jetstar, Virgin Australia, and Regional Express (Rex) cancel an average of one in three scheduled flights across their networks in July. The ACCC says this was the highest cancelation rate since April 2020.

In late July, Qantas said it was operating at less than 40% of its pre-COVID-19 capacity in July 2021. In August, Virgin Australia reported it was flying just a quarter of its planned schedule for that month. Rex’s Deputy Chairman John Sharp said his airline had shut down 80% of its business. Around the same time, Rex grounded its fleet of Boeing 737s and deferred further deliveries.

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Sydney drops out of top ten domestic city pairs

It’s not just airlines feeling the pain. Airports, notably Sydney and Melbourne, saw traffic dry up and with that, revenue evaporate. Usually Australia’s busiest airport, Sydney Airport did not figure in the top ten domestic city pairs in July.

The best performing domestic route that month was Brisbane – Cairns, an intrastate Queensland route.  Routes out of Melbourne did make the top ten list, but capacity on those routes crashed in mid-July when the city entered yet another lockdown.

“July was the first time that Sydney hasn’t been among the ten busiest routes in the country, which is a sign of the state of the industry,” said Mr Sims.

Australia’s ten busiest domestic airline routes in July. Source: Source: Data collected by ACCC from the Qantas Group, Virgin, and Rex via the ACCC

ACCC lays down the law amid potential profiteering concerns

The ACCC Chairman has put airports on notice over concerns from some airlines that airports may seek to significantly increase charges to airlines to recover lost profits from the pandemic. The competition watchdog said that would be a clear example of airports systematically taking advantage of their market power.

“We would be very concerned if the major Australian airports sought to use their monopoly position to charge airlines excessive prices in order to recover any lost profits from the pandemic,” added the ACCC Chairman.

“This could limit an already vulnerable sector’s ability to recover and impact on both consumers and the economy,”

Do you agree with the ACCC’s concerns? Do you think airports will try to recover lost revenue when domestic flying recovers? Post a comment and let us know.