domestic market, Omicron spread, domestic air routes, new low cost carriers

As New LCCs Dive In, Two Australian Airlines Brace For Price Wars

The incumbent airlines of Australia are being addressed by possible price wars as Australia comes out from strict travel restrictions in the world. A piece of great news for travellers – Are there any carriers affected by the pandemic? Not so much. 

The domestic airline industry of Australia has repressed at the times of the covid-19 pandemic with effects of border closure and travel restrictions, is currently speeding up for a price war in the aircraft market as new low-cost carriers enter challenging Australia’s leading incumbents Qantas Airways Limited and Virgin Australia. 

As the Regional Express Holdings Ltd (Rex) focuses on increasing new routes, the other low-cost carrier Bonza will concentrate on lighter air routes that come under the unserved or underserved category from the upcoming year.

The companies are introducing new competition into the industry for the first time since the introduction of the independent budget airline Tigerair Australia of Virgin in 2013. Their low fare option, like Rex’s A$69 ($49) one-way tickets for its new Sydney-Brisbane route, forces other companies to drop prices.

Emeritus Peter Harbison, the chairman of CAPA Centre for Aviation, said in a conference, “There has never been a three large jet player in this market for a sustained period. So who are the champions out of all this? The travelling public of Australia.” 

In October, the domestic market declined to 17% pre-pandemic passengers at the time when Sydney and Melbourne were under lockdown and are getting back on track as states are stuck with the plan of reopening borders despite the new variant, Omicron’s spread.

According to Qantas report, the airlines are climbing for a part of the currently closed Tigerair’s domestic market share that created a history of producing a profit of A$1 billion a year. Qantas airline is now expecting to return to the pre-pandemic level of domestic capacity within January and get better by April with the aim of increasing to 70% of market share. “The airlines will be competitive with the best in industry products and fares to defend our turf,” said Alan Joyce, the chief executive of Qantas.

The competition regulator of Australia declared that it was analyzing the capacity and pricing closely. However, the analysts say it could make the unique trading environment challenging to prove if the activity is not competitive or part of the recovery.

Qantas airline says that it needs to generate money and purchase idle aircraft and staff them back in the air instead of turning them into immediate profits. It has introduced around 50 new domestic routes during the pandemic period. According to Jayne Hrdlicka, the chief executive of Virgin said that it is adding air routes like Perth-Launceston as it aims to maintain one-third of Tigerair’s market share.

John Sharp, the deputy chairman of Rex, stated that it would include aircraft and expand its market to more big destinations. In contrast, Tim Jordan, the chief executive of Bonza, said that he believes there is going to be a profitable niche for being an independent low-cost carrier given Jetstar, which is owned by Qantas Airlines. Jordan also added about Bonza’s plan, “The plan is about its new growth, new chances and new markets. It is not about stealing anyone’s shares.”

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