A price war has erupted between domestic flights, and tickets between Melbourne and Sydney are sold for as little as $ 39.
Budget airline Qantas Jetstar, and Regional Express (Rex) have put thousands of domestic flights for sale.
How Did The Price War Start?
Rex sparked a price war when the company revealed it had reduced the price of Sydney-Melbourne route to only $ 39 on Monday.
Virgin and Jetstar very soon followed suit, offering the same fare for what is currently the seventh busiest airline route in the world.
Rex’s vice-chairman, John Sharp, said he hoped the sale would revitalize the domestic market and increase visitor numbers between major cities. It comes after both cities were excluded from the state discount tickets measure intended to stimulate the tourism industry.
Why The Price War?
“Peak tourism bodies reported yesterday that flagship stimulus programs from state and federal governments have not benefited Melbourne and Sydney,” Sharp said.
“This will now change as Rex’s ‘cheaper than the bus’ fares will see airfares between the two cities even lower than the federal government-sponsored Tourism Aviation Network Support program fare and will jump-start leisure and business travel.
“I believe this initiative will singlehandedly revive a moribund travel and hospitality industry in the two cities.”
After launching the price war, Sharp said he expected his rivals in the industry – including Virgin Australia, Qantas and Jetstar – to follow suit.
“The resulting copycat moves from our competitors will mean that there will be hundreds of thousands of $39 fares available.”
Competitive Airline Market
“Virgin Australia is committed to providing visitors with some of the most competitive airline fares in the market,” the company said.
IBISWorld’s chief industry analyst, Tom Youl, told the Guardian that Rex’s first action was aimed at shaking the industry.
“Its good marketing performance, it makes a little noise and they will try to take a small share of the market – on this route in particular – to employees like Qantas too.”
“They are trying to revitalize demand, especially in the domestic market. I think there is still a little bit of sensitivity, a little hesitation. People are less aware of their money, and there is a fair amount of sensitivity to prices out there.
“But it’s about putting people on the air again, making people go and fly again.”
Revenue from the domestic aviation industry is expected to decrease by 37% in the 2020/21 financial year and a 51% rebate by 2021/22.
In 2018/19, the domestic industry was worth about $ 14bn, but will be worth about half of that, $ 6.5bn, this financial year.
Rex’s offer is available until August 28, and Jetstar’s money is also available until the end of August.
