Omicron slows down airline industry but passengers see cheaper fares

• The domestic airline business is facing problems as a result of COVID-19, but customers have more options, lower prices, and expect to gain from the launch of the new carrier Bonza later this year
• A ACCC report shows the domestic airline industry has suffered another setback from late December as the Omicron wave hit the country
• Scheduled capacity reached 95 per cent of pre-pandemic levels in the week of Christmas, however, within days, airlines were forced to cancel hundreds of flights as passengers and airline staff went into isolation
• With all states and territories now open to vaccinated travellers, the industry’s recovery now largely depends on consumer confidence and willingness to travel.
• The new budget airline Bonza is getting ready to take off in the domestic market from mid-2022

The domestic airline business is facing problems as a result of COVID-19, but customers have more options, lower prices, and expect to gain from the launch of the new carrier Bonza later this year.

The latest ACCC report showed that the domestic airline industry has suffered another setback from late December as the Omicron wave hit the country.

Scheduled capacity reached 95 per cent of pre-pandemic levels in the week of Christmas, however, within days, airlines were forced to cancel hundreds of flights as passengers and airline staff went into isolation.

In December, 2.47 million passengers ended up flying domestically, which was 47 per cent of pre-pandemic levels. In January, the number of passengers only increased to 2.5 million.

“As we enter the third year of the pandemic, the entire aviation industry continues to face significant operational and financial challenges. The Omicron wave has demonstrated how precarious the path to recovery is,” ACCC Chair Rod Sims said.

With all states and territories now open to vaccinated travellers, the industry’s recovery now largely depends on consumer confidence and willingness to travel.

“The airlines now face a different challenge in trying to anticipate and respond to individuals’ changing appetite to travel in an uncertain COVID-19 environment,” Mr Sims said.

However, the report says there are positive signs that travel demand is growing following the peak Omicron peak in January and WA borders opening.

Airlines have seen early booking for the Easter period and Qantas has forecast a return to pre-pandemic domestic flying between April and June.

The new budget airline Bonza is getting ready to take off in the domestic market from mid-2022 and will fly across Queensland, New South Wales and Victoria. Notably, 80 per cent of Bonza’s initial route network is not currently served by any airline.

“We will be watching how the existing airlines respond to this new competition, and we will keep an eye out for any anti-competitive capacity increases or pricing practices,” Mr Sims said.

“We will pay particularly close attention to incumbent airlines entering any of the new routes announced by Bonza.”

Additionally, Rex has expanded its routes and there are now nine routes in Australia serviced by three airline groups- Qantas, Virgin and Rex.

“The Australian domestic airline industry has predominantly been a duopoly since deregulation 30 years ago, but we now have three airline groups competing on some of Australia’s busiest routes,” Mr Sims said.

“We’ve seen significant price reductions on these routes due to increased competition.”