Australian Domestic Aviation Soars Again, Yet Rising Fares Impact Travelers

The monthly domestic passenger traffic in Australia has rebounded to pre-pandemic figures, as noted in a recent report from the Australian Competition and Consumer Commission (ACC). Nonetheless, this growth in the domestic sector faces significant restrictions due to insufficient capacity, which has not aligned with the heightened demand. As a result, airfares have risen, impacting consumers adversely.

In June 2025, airlines in Australia recorded a 2.8% decrease in available seats compared to June 2019. While both Qantas Group and Virgin Australia have increased their capacity since 2019, the market has still not compensated for the exit of Tigerair in 2020. Tigerair was a low-cost subsidiary of Virgin Australia that ceased operations that year, with its functions absorbed by its parent company.

“The closure of Tigerair in 2020 considerably diminished low-cost travel options in the domestic market,” noted ACCC Commissioner Anna Brakey. “The ongoing shortfall in seat availability to meet growing demand likely means consumers are facing higher fares that would not have been the case in a more competitive market.”

The effects on the Australian domestic air market extend beyond just the loss of Tigerair. More recently, Bonza attempted but failed to establish new routes before shutting down in April 2024, while Regional Express (Rex), a long-standing domestic carrier, scaled back its operations due to challenges entering busy routes, relying instead on its regional network with around 50 Saab340 turboprops, heavily backed by the Australian Federal Government. Even these endeavors faced cutbacks in response to rising costs over the past year.

Despite a 12.3% drop in jet fuel prices leading up to June 2025, average airfares across various fare types rose slightly compared to the previous year. This trend indicates that limited seat availability in the domestic market is pushing airfares upward since travelers struggle to secure spots on desirable flights and turn to pricier options.

However, the ACCC suggests that some relief might be on the horizon. Both Qantas Group and Virgin Australia are set to welcome new aircraft shortly, with Jetstar and Qantas acquiring new Airbus planes and Virgin Australia taking on new Boeing 737 MAX 8 jets before 2025 concludes. Nonetheless, airlines have indicated that many of these additions will replace older aircraft initially, not necessarily leading to an immediate increase in overall capacity.

Furthermore, the Qantas Group’s fleet is expected to receive a boost following the decision to wind down its Singapore-based arm, Jetstar Asia. This move will see the 13 Airbus A320-200s from that fleet reassigned to Jetstar Australia to better address some of the heightened demand for domestic services, including routes to New Zealand.

A new startup, Koala Airlines, also looms in the wings of the domestic air market, though it has been in the planning stages since 2018, leaving its actual launch date uncertain.

Reliability Enhancements

The ACCC reported that the on-time performance for domestic flights reached a three-year high in April 2025. Domestic flights managed on-time arrivals 82.4% of the time, with Jetstar, Qantas, and Virgin Australia performing better than the long-term industry average of 80.7%—defined as arriving within 15 minutes of the scheduled time.

Virgin Australia achieved the highest on-time arrival rates for domestic airlines in April and May 2025, marking significant improvements since February 2022, when they recorded rates of 84.4% and 84.8%, respectively.

“This enhancement in on-time reliability is excellent news for travelers, allowing for greater confidence in their flight schedules,” remarked Brakey. “This progress stems from collective actions by airlines, air traffic controllers at Airservices Australia, and airport personnel.”

Cancellation rates have also seen improvement, with figures dropping below the long-term industry average of 2.2% in April and May 2025, before slightly rising to 2.4% in June 2025. Much of this positive trend can be attributed to the strong performances of Virgin Australia and Jetstar, with both airlines canceling only 0.7% of their domestic flights in April 2025.

Despite this, Qantas’ cancellation rates remain higher than those of its competitors. The ACCC report indicates that Qantas’ cancellations have averaged more than double the rates observed with Jetstar and Virgin Australia over the quarter leading to June 2025. “We will keep a close eye on cancellation rates across all routes and anticipate improvements where rates are high to minimize disruptions for passengers,” Brakey concluded.