THE cost benefit for Mildura travellers following the introduction of Bonza’s Melbourne service may be limited unless the airline further expands the number of weekly flights offered, according to the Australian Competition and Consumer Commission.
The ACCC’s final Airline Competition in Australia report says a lack of effective competition in Australia’s domestic airline industry, which has characterised the industry for decades, has resulted in higher airfares and poorer service for consumers.
But it says that the expansion of Rex and the entry of Bonza have created an opportunity for the domestic airline industry to enter a more competitive period, but the two airlines would need to grow significantly to compete meaningfully with airline heavyweights Qantas Group and Virgin Australia.
Bonza launched its unique Mildura-Sunshine Coast route in April and since its entry on the Melbourne-Mildura route in early May, Bonza’s minimum one-way fares for $49 have been less than a quarter of its competitors’ fares.
The ACCC said as well as having an additional choice of airline, Mildura travellers heading to Melbourne may also benefit from a competitive response from Qantas and Rex such as reduced airfares.
However, it said any response may be somewhat limited given that Bonza is currently only offering three flights per week on the route.
“For many consumers, the primary benefit of Bonza’s entry will be its low airfares and direct connections on new regional routes,” the report said.
“Although not part of its stated strategy, Bonza may expand into more contested routes in the future, including possibly larger inter-city routes.
“This would pose a more significant competitive threat to the other airlines.
“The response by other airlines to new competition will remain of interest to the ACCC beyond the expiration of the monitoring direction.”
The ACCC said the aviation industry was facing challenges due to shortages in qualified and experienced Australian pilots and engineers, as well as the supply chain issues that have persisted from last year.
Rex suspended its Adelaide to Mildura route in May 2023, citing challenges with pilot and engineer shortages, as well as a severe disruption in the supply chain of aircraft and engine parts.
Rex also announced a reduction of services on nine other regional routes across New South Wales, Queensland, South Australia and Victoria.
ACCC chair Gina Cass-Gottlieb said Rex’s expansion to major intercity routes and Bonza’s launch have been positive developments for competition, but their share of the market was small and there were barriers to growth.
She said that more than a year after the end of state border closures, the latest available data (April 2023) shows that passenger and capacity numbers remain below pre-pandemic levels.
“The pent-up demand for air travel that characterised the industry for most of last year is starting to ease,” she said.
Ms Cass-Gottlieb said the easing of demand was reflected in cheaper airfares in 2023 so far, although they remain above pre-pandemic levels.
