Australia's domestic airline industry recovers as jet fuel prices soar

Australia's peak consumer watchdog the Australian Competition and Consumer Commission (ACCC) showed that Australia's domestic airlines has almost fully recovered, regardless of the sky-high jet fuel prices.

The ACCC quarterly report to April 2022 released on Wednesday showed 4.5 million passengers flew on Australia's domestic airlines in April, which is 89 percent of pre-COVID levels.

"After two very challenging years, it appears the domestic airline industry is approaching a full recovery," said ACCC Commissioner Anna Brakey.

In fact, travel to popular travel destinations boomed compared to before the pandemic as Australians were eager to travel interstate. In April, flights between Australia's capital Canberra and the Gold Coast almost doubled from pre-COVID levels.

Despite the return of consumer confidence, the report also found that COVID-related workforce shortages and rising jet fuel prices were throwing cogs into the works.

During the Easter period, on-time departures dropped to 62 percent as worker shortages saw long lines and heavy delays.

In May, jet fuel prices hit an all-time high, eclipsing the previous high in 2008 of just below 250 Australian dollars (about 180 U.S. dollars) per barrel. This prompted Australia's national airline Qantas to cut back on their original forecasts for July and August capacity.

"While travelers have benefitted from generally low airfares over the past year as airlines encouraged people back to the sky, historically high prices for jet fuel means we are starting to see fares rise again," said Brakey.

Brakey said that as demand steadily builds, especially as corporate traffic increases, domestic travel would likely be operating at pre-pandemic levels in the latter half of the year.

"A sustained recovery over the coming years will improve the financial health of the domestic airline industry and help secure the additional competition we're seeing from new and expanding airlines," Brakey said.

The ACCC said that now all states and territories have opened their borders and the airline industry is stabilizing, it would be monitoring airline prices to ensure that domestic airlines are engaging in fair competition and pricing behavior.