The fare

The Australian Competition and Consumer Commission has been directed to monitor Australia's domestic airline market continuously since November 2023. [2] It publishes a report every quarter. The reports are detailed, technically rigorous, and largely unread by the general public.

They contain data that should be national news. The most important single figure is this: the price per kilometre on an Australian domestic route depends almost entirely on how many airlines are competing for that route. [4]

That table was presented to parliament by the Assistant Minister for Competition, Dr Andrew Leigh, in January 2024. [4] It is derived from the government's own competition taskforce analysis. [4] Its implication is unambiguous: the price Australians pay to fly is determined not by the cost of fuel, or the cost of labour, or the cost of aircraft maintenance, all of which are real factors, but by the number of airlines competing for their ticket. [4]

Australia's domestic market has two carriers on almost every route it has. [1] It had three briefly, when Rex attempted to enter capital city routes with Boeing 737s in 2022. Rex exited those routes in July 2024. [3] It had a prospective fourth in Bonza, a low-cost carrier that launched in 2023 and collapsed in April 2024. [3] After both exits, the ACCC documented higher fares and increased concentration. [9]

In other words, the price per kilometre is halved when three competitors fly a route compared with the situation when there is only a single monopoly airline. With four or five competitors, the price drops further still.Dr Andrew Leigh, Assistant Minister for Competition, January 2024 [4]

There is one number in Qantas's most recent financial results that tells the story of Australia's aviation market more clearly than any other. It is the operating margin comparison between Qantas's domestic business and its international business. [2]

In the first half of the 2024-25 financial year, Qantas Domestic recorded an operating margin of 16.1 per cent. [2] In the same period, Qantas's international operations recorded an operating margin of 7.1 per cent. [2] The ACCC noted this comparison explicitly in its May 2025 report. [2]

The difference is competition. On international routes, Qantas competes with Emirates, Qatar Airways, Singapore Airlines, Cathay Pacific, Air New Zealand, Korean Air, and dozens of other carriers. [2] Those carriers force prices down and margins compress accordingly. [2] On domestic routes, Qantas competes primarily with Virgin and Jetstar, its own budget subsidiary. [2] The margin is more than double.

The overall group results confirm the pattern. Qantas Group reported underlying profit before tax of A$2.39 billion for the full year to June 2025, up 15 per cent on the prior year. [5] Statutory profit after tax was A$1.61 billion, up 28 per cent. [5] Total industry revenue in FY24-25 was approximately A$17 billion. [14]

These are not crisis-recovery earnings. They are structural profits generated by a market that, as the ACCC's own data confirms, has limited competition and consistently high load factors. [2,6]

The airline industry uses load factors, the percentage of available seats that are filled, as a measure of supply meeting demand. [2] High load factors indicate strong demand; very high load factors indicate insufficient capacity relative to demand. [2]

Australia's domestic market is running at historically high load factors. Jetstar recorded a load factor of 91.2 per cent in January 2025, the highest recorded for any Australian airline since January 2019. [2] Virgin Australia hit 93.4 per cent in December 2024. [3] The industry average in March 2025 was 80.1 per cent, 1.8 percentage points above March 2019. [2]

High load factors indicate strong demand and are generally considered positive with respect to an airline's profit margins, but they can limit an airline's ability to respond flexibly to flight disruptions, reducing its network resilience.ACCC, Domestic Airline Competition Report, February 2025 [3]

Translation: the planes are so full that when something goes wrong, a delay, a cancellation, a missed connection, there are no spare seats to rebook passengers onto. [3] High profits and poor service are connected. The market structure that produces one also produces the other. [3]

Meanwhile, total domestic seat capacity in Q1 2025 was 2.7 per cent below 2019 levels. [10] Six years after the last normal operating year, Australia's airlines are still flying fewer seats than they were. Not because there is insufficient demand (load factors confirm there is more than enough demand) but because neither airline group has the economic incentive to add capacity when the existing capacity is already full and profitable. [2,3]

Australia has a long history of new airlines attempting to challenge Qantas's dominance. The history is also a long history of failure. [9,12]

Under the Two Airline Policy that governed Australian aviation from 1952 until deregulation in 1990, only two carriers were permitted to operate domestic routes: government-owned Trans Australia Airlines and privately-owned Ansett. [3] Deregulation was supposed to open the market. And for a period, it did: by the early 2000s, carriers including Compass, Impulse, Virgin Blue, and Tiger Airways all entered the market with varying degrees of success. [9]

The pattern that emerged was consistent: a challenger would enter, fares would fall as competition intensified, and then the challenger would either exit or be absorbed. Compass collapsed in 1991 and again in 1992. Impulse was bought by Qantas in 2001. Ansett collapsed spectacularly in 2001. Tiger Airways was eventually acquired by Virgin. [9]

The most recent chapter follows the same arc. Rex Airlines, a regional carrier, attempted to expand onto capital city routes using Boeing 737 aircraft from July 2022. [3,9] The project was undercapitalised and operationally ambitious. Rex entered voluntary administration in July 2024, exiting all capital city routes. [3,9] Bonza, a new low-cost carrier that launched in early 2023, collapsed in April 2024 after operating for only about a year. [3,12] It served 37 routes, 30 of which were unserved by any other airline. [12] After its collapse, those 30 routes went dark.

The second failed attempt at a third domestic carrier in a decade.ACCC, Switzer Daily, May 2025 [9]

And in the same breath: March 2025 airfares up 9.6 per cent, 'a pattern that may become familiar in a low-competition environment.' [9]

The argument that Australia's geography, its vast distances and relatively small population, justifies higher airfares is one the industry makes repeatedly, and it contains some truth. Flying Sydney to Melbourne is not the same as flying London to Paris. [4]

But the ACCC's own data refutes the geography argument when it comes to competition. The comparison is not Australia versus Europe. It is Australian routes with one carrier versus Australian routes with two carriers versus Australian routes with three carriers. [4] Same geography. Same distances. Same fuel. Different number of airlines. Fares almost halved. [4]

The European Union's Single Aviation Market, established in 1993, allows any EU-registered carrier to fly between any two EU cities. [4] The result was the emergence of Ryanair and easyJet as transformative competitive forces that drove European airfares to a fraction of what Australian domestic travel costs, even accounting for shorter distances. [4]

Australia does not have an open aviation market. International carriers like Qatar Airways can fly into Australian airports, but their ability to pick up passengers and fly them to other Australian cities, what aviation calls 'fifth freedom rights', is tightly controlled through bilateral air service agreements. [4] As this series will document in Article 3, when Qatar Airways applied to add 21 flights per week in 2023, the government blocked the application at the explicit request of Qantas.

Qantas regularly publishes data showing that its fares have moderated from post-COVID peaks. In its FY24 results, the airline noted that 'Group domestic fares were 8 per cent lower than last year.' [13] This is technically accurate: after the extraordinary post-COVID fare spike, prices did ease somewhat as capacity returned. [13]

But the relevant comparison is not year-on-year from the peak. The relevant comparison is with the structural baseline, with what fares would be if the market had the competitive structure that the ACCC's data shows is needed to produce lower prices for consumers. [4] And by that measure, fares remain elevated. December 2025 prices are 4.3 per cent above December 2024 prices. [7] October 2025 prices were the highest since December 2022. [8]

Virgin Australia's position is worth noting too. Under Bain Capital's private ownership, Virgin does not publish detailed financial results. [2] The market has two dominant carriers, only one of which is required to disclose its financial performance to the public. The ACCC receives non-public data from both under its monitoring direction, but that data is not available to consumers, journalists, or researchers.

The Treasurer's direction to the ACCC to monitor the market runs until December 2026. [2] Monitoring is not the same as intervention. The ACCC can document concentration, report on it, and express concern about it. What it cannot do is mandate a new entrant, reallocate slots, or compel either airline to add capacity. [2]

The basic facts of the Australian domestic aviation market are these, all sourced from the competition regulator's own quarterly reports: [1,2,4,7]

The price per kilometre on a route with three carriers is half the price on a route with one carrier, according to federal government data. [4]

Domestic operating margins (16.1 per cent) are more than double international margins (7.1 per cent) for the same airline. [2]

Load factors are at near-record highs, indicating demand well in excess of supply. [2,3]

Domestic seat capacity is still below 2019 levels despite record profits. [3,10]

Both carriers reported record or near-record earnings as of the most recent reporting period. [1,6]

Airfares remain above pre-COVID levels by multiple measures. [7,8]

This is not a post-COVID recovery story. It is the structural condition of a market in which two companies have divided most of the country between them, entry by challengers has failed twice in a decade, and the competitive pressure that would lower prices has been kept out, including, as this series will document, by a decision of the federal government made at the request of the dominant carrier. [9,11]

Article 2 of this series examines how the duopoly was built, and why every challenge to it has failed.