Buckle-up for higher airfares
Too few airlines, airport monopolies, and a toothless regulator add up to turbulence ahead for passengers.
Many retirees love to fly and there’s a trend of Australians over 65 wanting to see more of their own country.
This is driven by a desire for less complex travel, the popularity of the “grey gap year” for self-guided trips, and the ease of domestic flights compared to international travel.
Seniors are a significant, active segment of the tourism market focusing on regional and close-to-home holidays.
But don’t be surprised if the airlines don’t join the party by making flying easier or cheaper. In fact, it’s predicted ticket prices will continue to climb.
That’s because of the age-old Australian airline problem of too few carriers, weak competition, and a seemingly deliberate policy to limit supply by limiting the number of services and seats available to pre-pandemic levels, despite significant population growth and demand.
Add to that major expensive airport infrastructure development and an unregulated airport monopoly in the major cities, which allows airport corporations to charge airlines what they like.
Those costs will be passed on and even the competition regulator admits it is increasingly powerless to intervene.
These revelations are in a submission to the Senate by the Australian Competition and Consumer Commission (ACCC) warning that it lacks power and “no longer acts as a restraint” on monopolistic behaviour of the airports.
“The existing framework, based on ACCC monitoring and reporting, no longer acts as a constraint on behaviour because there is less of a threat of regulatory action than there was when the regime was first introduced over two decades ago,” the ACCC told a parliamentary inquiry.
Not surprisingly, the ACCC is asking for additional powers, including a commercial arbitration scheme that brings together the airports and airlines, something it has argued for since 2019.
“A commercial arbitration scheme would help to address concerns with the major airports exercising their market power, which would help to reduce airport charges faced by airlines including those that operate in regional locations,” the submission reads.
Airport redevelopments
Airports are facing major costly infrastructure upgrades – amounting to $19 billion over the next decade – which the ACCC predicts will be passed on as increased airline operation fees and charges. The airlines are likely to pass those costs onto travellers.
Australia’s four major airports – Sydney, Melbourne, Brisbane, and Perth – are “geographic monopolies” with the “ability to exercise market power”, the ACCC said.
“An airport not constrained by competition or regulation could be expected to exercise its market power to earn monopoly profit to the detriment of airport users and the broader economy.”
The ACCC says it does not have enough powers to address this.
Weak airline competition
Travellers are also paying for Australia’s weak domestic airline competition, which the ACCC describes as highly concentrated, with plenty of disincentives for newcomers to enter the market.
“Recent developments, including Rex’s unsuccessful expansion onto intercity routes and Bonza’s exit from budget leisure markets, highlight the challenges new or smaller carriers face in establishing a sustainable presence,” the ACCC observes.
It suggests the continuing duopoly will lead to higher airfares, saying “reduced rivalry between airlines has likely resulted in consumers paying more to fly than they would otherwise”.
Consumer protection
Consumer protections around disrupted flights needs enhancing, says the report, which endorses the Federal Government’s proposal to establish an Aviation Consumer Ombudsperson. It says this would especially benefit regional travellers who can be severely affected by disruptions to the few air services available.
“The introduction of a well-designed ombudsperson scheme will ensure that aviation consumers have access to accessible, fair, and effective dispute resolution,” the report says.
“It will also mean greater efficiencies and improved effectiveness in dispute resolution, including through incentivising airlines to improve internal complaints handling.”
The ombudsperson would be modelled on comparable schemes, such as the Telecommunications Industry Ombudsman. It would be funded by members of the scheme through a regular membership fee, plus an additional scheme fee for each member based on the volume of complaints against them and their complaints escalation rates.
Related reading: Australian Aviation, The Australian
Thousands of Australia-wide discounts
Exclusive offers and savings across dining, shopping, gift cards, and more – all in the EAT | PLAY | SAVE app.
Members save 10% on Travel Insurance*
National Seniors members receive a 10% discount on travel insurance policies*.
Financial Information Consultant
Speak to a real person and receive up-to-date information on retirement planning, superannuation, and more!
Branches
Expand your social circle, enjoy social events, day trips, guest speakers, and meet like-minded members.
Exclusive Travel Discounts
Save on tours, cruises, and holidays with exclusive discounts on National Seniors Travel.
Our Generation Digital Magazine
Receive a yearly subscription to Our Generation Digital Magazine.
The Good Guys Commercial
Members enjoy exclusive access to The Good Guys Corporate Benefits. Save on small and large appliances as well as technology.
Advocacy & Research
Your membership directly funds our advocacy and research work fighting issues that affect you.
Competitions
Access exclusive member-only weekly competitions including books, DVDs, CDs, movie tickets and more.
Discounts
In addition to the discounts app, members can save thousands on eGift Cards and other discounted products.
*The discount applies to the total National Seniors travel insurance premium and is for National Seniors Australia members only. Discounts do not apply to the rate of GST and stamp duty or any changes you make to the policy. nib has the discretion to withdraw or amend this discount offer at any time. This discount cannot be used in conjunction with any other promotional offer or discount
National Seniors Australia Ltd ABN 89 050 523 003, AR 282736 is an authorised representative of nib Travel Services (Australia) Pty Ltd (nib), ABN 81 115 932 173, AFSL 308461 and act as nib's agent and not as your agent. This is general advice only. Before you buy, you should consider your needs, the Product Disclosure Statement (PDS), Financial Services Guide (FSG) and Target Market Determination (TMD) available from us. This insurance is underwritten by Pacific International Insurance Pty Ltd, ABN 83 169 311 193.
