The Australian aviation market is in flux. There are various airport transactions pipelined while a domestic airline, Bonza, ceased operations in April after a short life; it launched at the beginning of 2023. Not long after that, Rex Airlines, the country´s third-largest operator also entered voluntary administration and downsized; now it only operates regional aircraft on smaller routes.

So, is this the right moment for a new low-cost airline to enter the market and is there potential to boost traffic volume?

Bonza targeted connecting regional hubs and tried to stimulate demand on new routes not offered by other airlines. Rex was similarly active in the regional market, while most recently trying to enter the big league with flights between the main cities.

Mature Domestic Market

With both airlines failing, that leaves only two players in the market, Qantas Group, with Qantas as a full-service carrier and its low-cost subsidiary Jetstar; and the much smaller Virgin Australia. This is not good for competition which generally favors consumers and drives down prices, subsequently increasing passenger volumes.

It has also proven to be difficult to sustain three major airlines in the Australian domestic system for various reasons. As a result of the static airline offer, the market is relatively mature, as can be seen from the trend in the last decade, achieving an average annual growth rate of just 1.8%.

A new entrant, Koala Airlines, intends to enter the market with a Boeing 737 MAX fleet, although little is known about its plans. Until a new major (low-cost) airline enters successfully, it is unlikely the mature growth trend will change in any way.

Traffic development has been similar in both the main trunk routes between Sydney, Melbourne, and Brisbane, as well as regional routes. Gold Coast, as a major tourism destination, is the only airport outside the top five cities that appears among the top routes.

In many countries, especially when LCCs enter, an uptick in direct routes and capacity is seen between smaller cities. This is something that Bonzo tried to achieve, but failed. It remains to be seen if Koala Airlines, or another disruptor, can squeeze its way in.

International Traffic to Key Gateways Only

International traffic is where the growth has come from in the last decade. An average 5.8% was achieved between 2010 and 2019. Traffic grew strongest in Melbourne, at nearly 9%, followed by Adelaide at 8%. The remaining cities achieved around 4-5% annual growth.