The ‘mere threat’ that’s needed in the battle for cheaper airfares | Airlines

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KEY POINTS

  • The price per kilometre travellers pay when flying drops when competitors are added to a route, new research suggests.
  • The competition minister argues Australia needs more players in the aviation industry.
  • The sector is currently being reviewed by the federal government.

Airline passengers typically pay half the amount for a ticket serviced by three carriers than if the route is flown by just one.

A federal task force has revealed a sector sensitive to competition, with research suggesting the “mere threat” of rivalry can be enough to lower airfares.

When serviced by a monopoly carrier, airfares average 39.6 cents per kilometre – a number that drops to 28.2 cents a kilometre with a competitor, and to 19.2 cents a kilometre when three providers are competing on the same route.

Prices per kilometre keep dropping as more competitors are added.

Presenting the early findings of the Competition Taskforce, set up last year, Assistant Minister for Competition Andrew Leigh said competition exerted “significant” downward pressure on airfares.

Leigh said a lack of competition in the aviation industry is particularly problematic in a country so heavily reliant on flying to connect cities and reach other parts of the world.

“For a resident of Darwin, it is often cheaper to fly from Darwin to Singapore than it is to fly from Darwin to Sydney, even although the international flight is longer than the domestic one,” he said in an address to the Chifley Research Centre in Melbourne.

He said the research adds to the “relatively limited evidence base” linking competitive pressures and…

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