If ever there was a case for the Albanese Government (or a future Dutton Government) to let the Australian Competition and Consumer Commission (ACCC) go feral on price exploiting
Businesses, this is the one. Unsurprisingly, it looks like our airlines have been taking us for a ride, with this story of domestic airfares rising while overseas fares have been falling.
Why? There’s a lack of competition and a lack of ACCC butt-kicking going on down under.
By the way, it is happening overseas, where there are heaps of quality airlines competing for your travel dollars, but not here. In fact, over the next three weeks as the importance of Melbourne escalates because of horseracing around the Cup, lots of interstate racegoers will be paying a pile more to go to the southern capital, probably to lose a pile on the gees-gees!
This might be tolerable if it was a one-off case when demand outstrips supply and therefore prices rise. But because we have a supply problem, the airlines can exploit all big events — grand finals, Test matches, Taylor Swift concerts, etc. — and it all adds to the services inflation that has remained high keeping the CPI elevated and has stopped the RBA from cutting interest rates.
This is a case of multiple government failures and it’s time a government did something about it.
To the facts, and this won’t make you happy. The Australian’s Robyn Ironside has reported that Flight Centre data told us the following:
- International airfares out of Australia continue to drop.
- Some routes are up to 21% cheaper for economy than a year ago.
- Business class is as much as 10% cheaper.
- Economy fares on the Melbourne to Los Angeles route averaged $1,672 in the September quarter, compared with $2,111 in the same period in 2023 – a 21% drop.
- For domestic fares, there was a 3-5% increase in the September quarter compared with a year ago, when Rex and Bonza were still flying.
So, what does that last fact say?
It’s simple. If there’s less competition, it’s easy to raise prices. Given there’s only two players in the market (economists call this a duopoly), that’s grounds for regulation to stop collusion on price.
Flight Centre’s corporate global chief operating officer Melissa Elf, says overseas fare decline is simply because there’s more competition and there’s been a 9% rise in seats going out of Australia on offer.
“We’ve seen a year-on-year drop in average international fares every month for well over a year now, so it’s more than just a trend; this is increasing stability in the travel industry,” Elf told The Australian.
“The biggest drops in economy fares in the latest quarter are those into the United Arab Emirates, Qatar, France, UK and Italy.”
Overseas fares falling aside, the only other good news revelation was Elf’s take on a recent development. “With demand into Europe, the Middle East, Asia and the US remaining high, it’s critical more flights and competition are added, and announcements like that from Virgin and Qatar – once approved – is the kind of thing the industry needs to ensure prices drop even further,” she explained.
This price exploitation happened under Alan Joyce when he headed up Qantas. His price actions foiled the attempt by Virgin’s John Borghetti to bring competition to our domestic airfares and governments stood silent as Qantas undercut Virgin’s price cuts because they were big enough to do it. And yes, government ministers stood silent. But it’s time that something is done to ensure consumers in Australia aren’t continually exploited.
