Source: Australian Ministers for Regional Development
The ACCC is closely monitoring Australia’s airline industry in response to unfolding events in the Middle East, a key development observed in its latest Domestic Airline Competition report.
The conflict has caused significant disruption to international air travel to Europe in particular, including airspace closures, flight cancellations and route diversions.
“The Middle East plays a critical role in global aviation, and we’ve already seen airline operations affected worldwide, with potential for impacts to flow into our domestic market.” ACCC Commissioner Anna Brakey said.
Whether consumers are entitled to a refund or other remedy for flights disrupted by the Middle East conflict will depend on the individual circumstances of any booking or cancellation.
The consumer guarantees in the Australian Consumer Law are unlikely to apply if the airline delays or cancels a flight due to the actions of a third party, such as a government closing its airspace or implementing flight restrictions.
In these circumstances, whether a consumer is entitled to a refund will depend on the terms and conditions of their booking.
However, airlines may still be required to provide a remedy under the consumer guarantees if the reason for the delay or cancellation is not due to the actions of a third party, such as the failure to meet safety standards or a natural disaster.
“We have been encouraging consumers with an upcoming international flight to contact their airline to understand their options.” Ms Brakey said.
While the immediate impacts have centred on disruptions to international services, airlines and passengers are already feeling the impact of significant increases to global jet fuel prices.
“Major Australian airlines typically hedge a proportion of their fuel needs, which helps to insulate them from short-term fuel price movements,” Ms Brakey said.
“However, if jet fuel prices remain elevated for a prolonged period, airline costs may increase and this could ultimately lead to higher domestic airfares.”
Reduced supply of long-haul services from the Middle East has shifted passenger demand to hubs in Asia, particularly on routes to Europe.
This high demand is placing upward pressure on airfares where capacity is constrained.
Airlines can change prices in response to demand, supply or input costs, but they must not make false or misleading statements about the reasons for any price increases.
“While market conditions will ultimately determine the cost of flying, we are closely monitoring price movements, market behaviour and the airlines’ representations to consumers, and will act if there is behaviour that contravenes competition and consumer laws.” Ms Brakey said.
Domestic service reliability improved overall, but cancellation rates varied between airlines in the January quarter
While international disruptions and cost uncertainties have emerged more recently, the report also shows that overall performance improved over the quarter but cancellation rates varied between carriers.
Following a weaker November, on-time performance did steadily improve over the quarter in the domestic market.
However, the industry on‑time arrival rate was 78.4 per cent in January 2026, still below the long‑term average of 80.5 per cent.
The industry cancellation rate was 2.1 per cent in January 2026, slightly below the long-term average of 2.2 per cent.
Rex and Virgin Australia reported cancellation rates of 0.8 and 0.9 per cent respectively in January, well below the long-term average.
Jetstar’s performance was consistently worse than the other airlines across both metrics, recording a 67.7 per cent on-time arrival rate and cancelling 3.2 per cent of all flights in January. Qantas also recorded an elevated cancellation rate of 2.7 per cent.
“Jetstar’s on‑time performance in the quarter to January 2026 was well below the industry long‑term average, which is a concern for passengers,” Ms Brakey said.
Domestic airline on-time performance rates (arrivals) – January 2024 to January 2026
Source: BITRE, On-time performance time series – January 2026. Qantas figures include QantasLink and Virgin Australia figures include VARA.
Note: A flight is considered on-time if it arrives within 15 minutes of the scheduled arrival time shown on the airline’s schedule.
Domestic capacity growth continues to outpace passenger demand
Airlines continued to increase seat capacity over the quarter to January 2026, supported by new aircraft deliveries, redeployment of aircrafts across domestic networks, and greater use of existing fleets.
“It’s pleasing to see airlines increase capacity, offering 2 per cent more seats in January 2026 than a year earlier. We’ve now seen capacity growth outpace passenger demand for 6 months in a row,” Ms Brakey said.
However, total seat capacity remained 3.3 per cent below pre-COVID levels in January.
Average airfare prices also fell during the quarter to January 2026, but were still 4.3 per cent higher in December 2025 compared to December 2024.
Passenger demand followed seasonal patterns, remaining strong through November and December 2025, before easing in January 2026 as holidays wound down and corporate travel demand remained low.
The Easter school holidays and ANZAC day are again both expected to drive an increase in demand for leisure travel in April.
The Qantas Group and Virgin Australia’s mid-year financial results highlight low domestic competition and strong passenger demand
The Qantas Group and Virgin Australia both reported strong financial performance and growth in the first half of 2025-26.
The Qantas Group reported record underlying earnings before interest and taxes (EBIT) of $1.59 billion, an increase of 5.4 per cent from the first half of 2024-25.
Virgin Australia reported underlying EBIT of $490 million across its whole operations including its domestic, international, and frequent flyer program. This was an increase of 11.7 per cent from the first half of 2024-25.
“The strong financial results reported by The Qantas Group and Virgin Australia demonstrate the ongoing resilience of Australia’s domestic aviation market, driven by consistently strong passenger demand and favourable operating conditions,” Ms Brakey said.
“Nearly 99 per cent of all flights were serviced by either Qantas Group or Virgin Australia, with high barriers to entry in the aviation industry contributing to a concerning lack of competition and choice for consumers.”
Background
On 6 November 2023, the Treasurer directed the ACCC to recommence domestic air passenger transport monitoring. Under this direction the ACCC is to monitor prices, costs and profits relating to the supply of domestic air passenger transport services for a period of three years and to report on its monitoring at least once every quarter.
The ACCC collects data from Jetstar, Qantas, Rex and Virgin Australia for monitoring purposes.
Rex entered voluntary administration in July 2024 but continues to operate its regional services. The government is guaranteeing regional flight bookings for Rex customers throughout the voluntary administration process.