We explore the most recent ACCC quarterly report on domestic airline competition in Australia.
The latest report from the Australian Competition and Consumer Commission (ACCC) on domestic airline competition reveals a market where demand is soaring, but concerns remain that capacity and competition are struggling to keep up – leaving consumers to navigate higher fares, loyalty program pitfalls, and limited choice.
Background
The COVID-19 pandemic caused unprecedented disruption to the Australian airline industry, leading to a sharp decline in passenger numbers, financial instability for carriers, and significant changes to the competitive landscape. In the aftermath, concerns emerged about the potential for anti-competitive behaviour in the domestic air passenger services market, which could result in fewer airlines, higher airfares, and reduced flight options for consumers. Recognising these risks, in June 2020 the Australian Government directed the ACCC under section 95ZE of the Competition and Consumer Act 2010 (Cth) (the Act) to monitor the prices, costs, and profits of Australia’s domestic airline industry.
While this initial monitoring direction concluded in June 2023, a second direction was issued in November 2023, which will see the ACCC’s monitoring role continue until December 2026.
ACCC Chair Gina Cass-Gottlieb reaffirmed the regulator’s commitment to addressing competition and consumer issues in aviation when setting the ACCC’s 2025–26 compliance and enforcement priorities, highlighting the pressing need to tackle challenges in the domestic aviation sector, particularly in light of the limited competition following Bonza’s exit of the market and its implications for consumers.
The ACCC’s most recent quarterly report, Domestic Airline Competition in Australia, published on 12 August 2025, provides a timely snapshot of the sector’s competitive dynamics, with implications for both industry and consumers.
Key Findings: Demand Up, Competition Down
The report paints a picture of a market in flux:
- Passenger demand is outpacing capacity: Demand for domestic air travel has continued to soar, with passenger numbers now tracking at or above pre-pandemic levels. However, the number of available seats remains below 2019 figures, largely due to the exit of Tiger and limited new capacity, despite airlines upgrading fleets with new and redeployed aircraft. In June 2025, 2.3% more passengers flew than in June 2024, but seat capacity increased by just 0.4%.
- Market dominance by two major players: The domestic market is now more concentrated than ever. Two major airline groups together carried over 98% of all passengers, with the Qantas Group alone servicing roughly 65% of the market. Since the withdrawal of Rex Airlines from major city routes in mid-2024, no route is serviced by more than two major airline groups. For 90% of routes, choice is limited to just two airlines; for the remaining 10%, routes are serviced exclusively by 1 airline group.
- Airfares remain high despite lower fuel costs: Despite a 12.3% drop in jet fuel prices, average airfares in June 2025 were 0.8% higher than the previous year. The limited growth in seat supply is likely a key driver, with strong demand allowing airlines to maintain or increase prices, especially during peak periods (such as school holidays and public events).
Frequent Flyer Programs: Consumers Beware
Frequent flyer schemes have become central to airline business models, accounting for nearly a quarter of underlying earnings for each of the two major airline groups. These loyalty programs are designed to foster repeat business by offering members a suite of exclusive benefits, including reward flights, seat upgrades, access to airport lounges, and a range of other goods and services.
The ACCC reports that impact of frequent flyer programs on consumer behaviour is profound, with 71% of Australians reported that these schemes influence their purchasing decisions. Many travellers are now more likely to select flights based on their loyalty status rather than price or convenience. The allure of accumulating points is so strong that earning frequent flyer or other reward points is now the second-most common reason Australians apply for a new credit card.
The ACCC warns consumers need to exercise caution and remain informed in order to maximise benefits from frequent flyer programs. The ACCC recommends that consumers consider the following factors when deciding whether to join a frequent flyer program, apply for a co-branded credit card, or engage in other point-generating purchases:
- Redemption value: The value consumers receive from frequent flyer points is highly variable to the redemption option and the frequent flyer program. The best value is typically found when points are used for seat upgrades, followed by premium flights (e.g. business or first class), then economy flights, hotels, car rentals, and finally, other goods and services. Notably, using points for reward seats generally offers better monetary value than using them for ‘Points plus Pay’ options.
- Points devaluation: A significant issue for consumers is the devaluation of points, which occurs when airlines increase the number of points needed to redeem rewards.
- Expiry of points: Points may expire following periods of inactivity. Across the two major airline groups, points expire after 18-24 months of inactivity. This creates pressure on consumers to remain active in the programme or risk losing accumulated points, which can be particularly frustrating for infrequent travellers.
- Availability of rewards seats and upgrades: Airlines maintain control over the number of rewards seats and upgrades available, and this availability fluctuates depending on the route and timing. Additionally, a traveller’s status tier within the loyalty programme can affect their access to these rewards, often favouring higher-tier members and making it harder for regular consumers to benefit.
To derive the greatest benefit from frequent flyer programs, savvy travellers must understand the terms and conditions and weigh the potential benefits of frequent flyer points which may lose value, expire, or be difficult to redeem against the upfront cost of the flight or point-generating purchases.
Looking Ahead: Recommendations for Industry
The ACCC has underscored the critical need for greater transparency and reliability in frequent flyer programs, urging that airlines have a responsibility to keep their members fully informed.
Recommendations from the ACCC encourage airlines to ensure frequent flyer terms and conditions are clear and accessible, including providing easily understood information on how points can be earned and redeemed, the process for earning and maintaining status credits, and the conditions under which points may expire. Changes to loyalty programs, such as adjustments to point values, redemption options, or expiry policies, should be communicated clearly and well in advance of any change taking effect, so as to allow members a fair opportunity to use their accumulated points under the existing terms before any new rules take effect.
As loyalty programs become ever more central to airline strategy, transparency and consumer trust will be key areas of regulatory focus in the years ahead. For now, travellers need to keep their seatbelts fastened and their eyes open…both for the best deals and for the fine print.