Domestic flights are cheaper than they have been in a decade, as the major airlines battle it out against Rex

Rex is helping slash domestic airfares.

• Flights between Sydney and Melbourne are now at their lowest price in over a decade, as competition heats up between Australia’s airlines.
• A new report from the ACCC has attributed to fall in prices largely to Rex competing on more capital city flights during a boom in domestic tourism.
• While welcoming the extra competition, the ACCC also revealed it is investigating claims that Qantas and Virgin are trying to drive Rex out of the market.
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Despite intermittent lockdowns and border closures, there may have never been a better time to travel, or at least fly, around Australia.

Surging consumer confidence combined with greater competition has helped create a domestic tourism boom, the competition watchdog reports in a new analysis of the country’s airlines.

Specifically, the ACCC said the expansion of regional airline Rex into more routes as having helped slash the price of fares to levels not seen in years.

“Passengers flying Melbourne–Gold Coast, Melbourne–Adelaide and Sydney–Gold Coast now have a choice of four airlines, as Qantas, Jetstar, Virgin and Rex are all operating on the routes,” chair Rod Sims said.

“The impact of increased competition can be seen on all of Rex’s new intercity routes, including Sydney–Melbourne where airfares fell to their lowest level in a decade following Rex’s entry.”

Flights between Sydney and Melbourne can currently be bought for as little as $39 each way, or roughly less than half of what they went for prior to the pandemic.

The resulting price war has spread into other routes as well, with rivals managing to take some of Qantas’ market share, currently sitting at 69% of all flights. While Sims acknowledged this was high, he attributed it to the departure of Virgin’s budget option Tigerair from the market.

It demonstrates what Rex, which commands just 2% of flights, is up against, with the new challenger even accusing Qantas and Virgin of anti-competitive behaviour. The ACCC notes that Rex has complained that “rivals have been increasing capacity beyond passenger demand”, in a possible bid to outmuscle the new entrant.

“Increasing capacity to meet demand and offering discounted fares is generally a sign of competition and is good for consumers. However, the ACCC will consider taking enforcement action if capacity and pricing decisions materially damage competition, including by preventing rivals from competing effectively, or driving a competitor off a route or out of business,” Sims said.

Each are now fighting over a piece of a quickly growing pie. Virgin has announced it has brought 10 more Boeing 737s back into service as it aims to return to 80% capacity by the end of financial year. Qantas has followed suit, bringing on more regional aircraft and ramping up flights between Adelaide and Canberra.

“Victoria represents about 20% of our total network and with restrictions in Melbourne easing and as borders start to reopen, we expect to see a quick rebound in travel demand just as we have in other cities when lockdowns ended,” Qantas CEO Alan Joyce said on Thursday. “Our forward bookings certainly suggest that’s going to be the case.”

ACCC figures show flight passengers were up to 55% of their pre-pandemic levels in March, up sharply from around 40% just three months prior.

While recent virus outbreaks are expected to delay a full recovery, previously predicted for the second half of this year, heavily discounted flights and increased competition are proving a rare victory for passengers.