Travel restrictions as a result of the recent COVID-19 Delta outbreaks have brought the majority of domestic flying to a stop and delivered a significant blow to the local airline industry, the ACCC’s latest Airline Competition in Australia report reveals.

The report, released today, shows passenger numbers in July 2021 plunged to 23 per cent of pre-pandemic levels, after recovering to a peak of 68 per cent of pre-pandemic levels in April 2021. Passenger numbers reported for August and September 2021 are expected to be even lower.

Qantas, Jetstar, Virgin and Rex combined were forced to cancel one in three flights in July 2021, which is the highest cancellation rate since April 2020. Weekly passenger numbers in Victoria fell 91 per cent from mid-May to early June, and in NSW they dropped 97 per cent between mid-June and the end of July.

“The Delta outbreak has hit the domestic airline industry hard, and it has unfortunately halted the airlines’ recovery just as they were starting to approach pre-pandemic levels of flying,” ACCC Chair Rod Sims said.

The report reveals that routes in and out of Sydney Airport were not in the top 10 busiest routes in July 2021, despite it normally being Australia’s busiest airport. Intra-state Queensland routes were the busiest, with Brisbane to Cairns, Townsville and Mackay among the most popular.

“With many state borders closed, those that could fly were doing so closer to home,” Mr Sims said.

“July was the first time that Sydney hasn’t been among the 10 busiest routes in the country, which is a sign of the state of the industry.”

The cancellation of flights forced Qantas, Jetstar, Virgin and Rex to implement temporary stand downs until flying can resume. The Australian Government announced new support through the Retaining Domestic Airline Capability program, which gives eligible airlines $750 per week for frontline employees that are otherwise unable to access COVID-19 disaster payments. Additionally, the government extended a number of existing aviation support programs until the end of the year.

Despite the reduced number of flights, the industry remains optimistic that demand for domestic travel, especially to leisure destinations, will bounce back strongly when vaccination targets are reached and border restrictions are eased.

The ACCC has recently heard concerns from some airlines that airports may seek to significantly increase charges to airlines in order to recover lost profits from the pandemic. The report explains that the ACCC believes such actions would be inconsistent with the Australian Government’s Aeronautical Pricing Principles and would be a clear example of airports systematically taking advantage of their market power.

“We would be very concerned if the major Australian airports sought to use their monopoly position to charge airlines excessive prices in order to recover any lost profits from the pandemic. This could limit an already vulnerable sector’s ability to recover, and impact on both consumers and the economy,” Mr Sims said.

The report notes the recently released Harris review commissioned by the Australian Government, which considered the scheme for managing airline use of Sydney Airport. The ACCC supports recommendations that limit incumbent airlines’ ability to keep more take-off and landing slots than they need.

“Access to take-off and landing slots at Sydney Airport can be a significant barrier for airlines to enter the market or expand their services,” Mr Sims said.

“The recommendations proposed by Peter Harris, such as greater transparency and a stronger system for monitoring compliance with airport slot rules, should make more slots available for new and expanding airlines.”

The report also looks at the provision of air passenger services in regional Australia. While air services fulfil an important role keeping regional communities connected with the rest of Australia, the need for airlines to recover their operating costs from a smaller number of passengers often results in higher airfares.    

“Passengers on regional routes are less likely to experience the benefits of competition between multiple airlines, and regional communities can face higher airfares than those travelling on busier routes,” Mr Sims said.

Since the pandemic began, the Qantas Group has extended its dominance in regional areas. On routes connecting larger cities to regional locations, the Qantas Group carried 70 per cent of passengers in June 2021, up from 63 per cent pre-pandemic. The group also carried almost 9 in every 10 passengers travelling between two regional locations.

The Qantas Group has also increased its network reach in regional areas over this time, in contrast to Virgin and Rex. Virgin’s reduced regional operations are due to its closure of low cost carrier Tigerair, as well as a streamlining of its fleet to Boeing 737s - an aircraft too large for most regional routes. The networks of all airlines continue to evolve in response to changing border situations and demand.

Virgin’s competitive strategy also continues to evolve and the report mentions the airline’s approach to the corporate travel market. A recent industry study found that average domestic corporate airfares offered by Virgin were lower than Qantas, and the gap between the two had widened. The ACCC will continue to monitor Virgin’s strategic shift towards more value-conscious travellers, and whether it may result in Qantas facing less competition at the premium end of the market.   

Australian domestic air services – July 2019 to July 2021

Graph showing that the NSW and Victoria COVID-19 lockdowns from late-June 2021 caused domestic airlines to cancel a large number of flights

Source:  Bureau of Infrastructure and Transport Research Economics; Australian domestic airline activity.
Note:  Data is for regular public transport and does not include charter operations.

Weekly passengers on Victoria, NSW and all domestic routes – January 2021 to July 2021

Graph showing that weekly passenger numbers on Victoria and New South Wales routes fell sharply from June 2021

Source:  Data collected by the ACCC from the Qantas Group, Virgin and Rex.
Note:  The ‘Victorian routes’ and ‘NSW routes’ series both includes flights between the two states, therefore the sum of ‘Victorian routes’, ‘NSW routes’ and ‘Other domestic routes’ exceed the figures in ‘All routes’.


On 19 June 2020, the ACCC was directed by the Treasurer, The Hon Josh Frydenberg MP to monitor the prices, costs and profits of Australia’s domestic airline industry and provide quarterly reports to inform Government policy. This report is the fifth under the Treasurer’s direction.

The direction under Part VIIA of the Competition and Consumer Act enables the ACCC to require information from relevant companies. The direction is for three years.

The Australian Government’s Aeronautical Pricing Principles outline the government’s expectations for how airport operators should set access charges for aeronautical services (for example, runways, terminal buildings and taxiways). The principles stipulate that prices should be set to allow the airport to recover actual costs incurred, including a risk-commensurate return on investment in providing aeronautical services to its customers.