A federal task force has revealed a sector sensitive to competition, with early results suggesting the "mere threat" of rivalry can be enough to lower airfares.
When serviced by a sole carrier, airfares average 39.6 cents per kilometre - a number that drops to 28.2 cents a kilometre with a second rival, and to 19.2 cents a kilometre when a third is added.
Presenting the early findings of the Competition Taskforce, set up last year, Assistant Minister for Competition Andrew Leigh said competition exerted "significant" downward pressure on airfares.
Dr Leigh said a lack of competition in the aviation industry was problematic in a vast country that relied so heavily on flying to connect cities and reach other parts of the world.
"Australia's aviation history shows the value of competition," Andrew Leigh said. (Lukas Coch/AAP PHOTOS)
"For a resident of Darwin, it is often cheaper to fly from Darwin to Singapore than it is to fly from Darwin to Sydney, even although the international flight is longer than the domestic one," he said in an address to the Chifley Research Centre in Melbourne.
The aviation sector came under fierce scrutiny last year following the government's decision to block Qatar Airways from additional flights in Australia, with accusations the call was made to protect Qantas from a competitor.
The federal government has since issued a review of the sector - including its competitiveness - with a white paper expected midyear.
Dr Leigh said more than a dozen airlines operated in Australia before World War II, but from the 1950s to the 1980s, a duopoly prevailed, keeping prices high.
"Only with the deregulation of aviation in the late 1980s did flying become affordable for many middle-class families and small businesspeople," he said in his speech.
"Australia's aviation history shows the value of competition."
The minister also unveiled new findings on mergers, coinciding with the Australian Competition and Consumer Commission's crackdown on corporate marriages that lead to too much market concentration.
The analysis found mergers were extremely concentrated among larger firms and roughly two-thirds happen without the consumer watchdog's knowledge.
About 1000-1500 mergers were taking place each year compared with the 330 the ACCC considered annually under the voluntary notification system.
The consumer watchdog has been pushing for mandatory notification and approval of upcoming mergers, with some firms thought to be pushing the boundaries of the voluntary set-up and offering up incomplete, incorrect and late information.
32°C