Australian domestic aviation recovers, but capacity lags and fares rise

(AUSTRALIA) Australian domestic aviation is flying close to full by mid‑2025, with passenger numbers back at or above pre‑COVID levels while seat supply lags. That tight balance is pushing fares higher, as planes are fuller and airlines post strong profits, according to official statistics and the competition regulator. The squeeze matters for new arrivals, international students, and regional workers who rely on affordable, reliable travel to settle, study, or commute across the country.

Passenger demand vs supply — the big picture

Bureau of Infrastructure and Transport Research Economics (BITRE) data shows 5.20 million domestic commercial passengers in May 2025, up 1.4% year on year and 1.6% above May 2019. Regular Public Transport (RPT) passengers reached 4.84 million, up 2.0%.

But seat supply barely moved:

• Available seat kilometres (ASKs) rose only 0.3% year on year
• Revenue passenger kilometres (RPKs) grew 3.4%

The net effect: the domestic load factor climbed to 80.7% from 78.3% a year earlier — a clear sign of a tight market that supports higher pricing.

Across FY2025, total domestic flights fell by roughly 1% even as demand outpaced fleet capacity, producing “record load factors,” according to Airservices Australia. Media summaries of the Australian Competition and Consumer Commission’s (ACCC) 12 August 2025 assessment note that in June 2025, seats flown by major carriers were 2.8% below June 2019, showing supply still hasn’t fully recovered.

With demand strong and capacity constrained, late bookers — especially on busy trunk routes and peak periods — are more likely to face steep fares.

The ACCC has a standing direction from November 2023 to track airline prices, costs, and profits. Its May 2025 update highlights how strong demand, limited capacity, and a stable duopoly have supported higher fare outcomes for Qantas Group and Virgin Australia.
For details on the regulator’s monitoring program and recent reports, see the ACCC’s official page: https://www.accc.gov.au/regulated-infrastructure/airports/airline-competition-in-australia.

Tight capacity lifts fares as planes run fuller

In practice, a higher load factor means fewer empty seats and less room for sharp discounting. BITRE’s May numbers — ASKs barely growing while RPKs rise — show why many travelers are paying more unless they book early.

This pattern matches the profit story:

• In the first half of FY2024–25, Qantas Group reported domestic EBIT of $916 million
  • Qantas Domestic: $647 million
  • Jetstar Domestic: $269 million
• Virgin Australia posted record first‑half earnings.

Strong yields in a tight market are consistent with fuller planes and a stable two‑airline structure.

Why is supply lagging?

• Ongoing aircraft supply chain problems limit fleet additions and maintenance throughput (Airservices Australia).
• Operational hurdles — severe weather (including ex‑Tropical Cyclone Alfred in March 2025) — clipped schedules early in the year.
• Market structure remains a duopoly: after Tigerair’s exit, significant new capacity has not entered, and the ACCC says connections and market dynamics remain “stable” with few signs of a new challenger scaling up.

Reliability is one bright spot. Airservices reports on‑time performance at a five‑year high in FY2025, helped by stronger governance and broader use of Ground Delay Programs that smooth traffic peaks. That can reduce disruption costs and missed connections for families and workers moving across states, but it does not create extra seats. When demand outstrips supply, average fares remain firm.

Policy levers and implications for migrants, students, and regional workers

Policy moves are under way, but relief will be gradual.

• The federal government’s Aviation White Paper, released 26 August 2024, set 56 initiatives through 2050 to support competition, a better passenger experience, and regional connectivity.
• A key step began in April 2025, when a new body took over Sydney Airport slot management. Authorities and the ACCC will watch whether more open and efficient slot use allows extra services and sharper competition on Australia’s busiest routes.

Looking ahead:

• Western Sydney International (WSI) is due to open in 2026. Officials view WSI as a new access point that could ease bottlenecks and broaden choice in the Sydney basin.
• The fare impact will depend on how airlines allocate aircraft between the two Sydney airports and whether additional fleets arrive.
• The White Paper also backs stronger ACCC data collection at major airports, aiming for clearer aeronautical pricing and better bargaining. Transparency can help, but it won’t substitute for fresh capacity.

Regional Australia — mixed outcomes:

• Regional airport passenger movements: 2.08 million in May 2025 (+2.5% year on year), per BITRE.
• Some routes saw service reductions, and fixed‑wing charter passengers fell 7.0%.
• This hurts remote communities — including First Nations regions, mining towns with fly‑in/fly‑out workforces, and skilled migrants on regional visas who rely on dependable links.
• CASA’s General Aviation Workplan 2025 aims to reduce regulatory and cost burdens in general aviation and support regional operations, but such changes won’t quickly boost mainline seats.

Practical impacts for newcomers and actions to take

For newcomers, these trends have direct personal effects. Temporary visa holders and international students often need multi‑leg journeys — landing in one city, then connecting domestically to settle, attend orientation, or reach regional employers.

With Australian domestic aviation still tight, plan for earlier bookings, especially during school holidays and long weekends.

• VisaVerge.com analysis: families arriving from overseas who wait to purchase domestic segments after securing visas often face higher last‑minute prices on popular routes like Melbourne–Sydney and Brisbane–Sydney when planes are already close to full.

What to expect through late 2025 and into 2026 (based on latest data and regulator views):

1. High load factors are likely to persist unless airlines add more aircraft or redeploy capacity domestically.
2. Fare pressure should remain, most visible on constrained city pairs and peak periods.
3. Slot changes at Sydney and the opening of WSI could widen access over time, depending on carrier scheduling and enforcement.
4. Reliability may keep improving as Airservices expands air traffic management tools, reducing missed connections and rebooking stress.

Practical steps to soften the hit:

• Book earlier for peak travel to capture lower fare buckets before planes fill.
• Compare nearby airports where possible and check off‑peak times for price and availability differences.
• For regional moves, monitor schedules closely; limited frequency means fewer backup options if a flight cancels.
• If you’re arranging relocation for a job or study, ask your employer or university about flexible arrival windows — shifting by a few days can lower costs in a high load factor environment.

Key statistics (May 2025)

Bottom line

Demand has healed faster than capacity. The policy pipeline — slot reform, WSI’s opening, and more robust monitoring — could tilt the market toward better access and more choice over time. But until more seats arrive, travelers should expect firm fares, especially when booking late on busy routes.

For migrants and students building new lives across Australia’s vast distances, planning ahead remains the best way to keep costs manageable while the system finds its post‑pandemic balance.