Australia / Press Releases
Positive Outlook for Domestic Airlines as Borders Reopen

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by Tom Youl
Nov 24 2020

Domestic flights between Melbourne and Sydney, once the second most popular flight route in the world, resumed this morning as Victoria finally conquered its second wave of COVID-19. Interstate border closures have caused immense damage to the Domestic Airlines industry, causing revenue to contract by an estimated 37.3% in 2020-21, to $6.5 billion.

‘Australia’s airlines have taken a hammering over the past six months, but we expect things to improve during the upcoming Christmas season. Assuming no further widespread outbreaks of COVID-19 occur in Australia, we may see a revival in the domestic Tourism industry,’ said IBISWorld Senior Industry Analyst Tom Youl.

Coming out of hibernation

Qantas is set to resume 15 flights per day between Sydney and Melbourne, well below the typical 45 flights per day offered prior to the COVID-19 pandemic. Demand for domestic air travel is anticipated to accelerate next year, causing revenue for the Domestic Airlines industry to rise by an estimated 51.4% in 2021-22, to $9.9 billion.

‘Qantas recently celebrated its 100th birthday and it has certainly been a tough year for the airline. However, domestic travel is forecast to recover next year, and international travel will potentially rebound strongly during the second half of 2021-22. In the domestic market, Qantas may end up in a better position overall, due to the weakened threat of Virgin Australia,’ said Mr Youl.

Deloitte completed the sale of Australia's second-largest airline to Bain Capital on Tuesday, with all of Virgin's shares transferred to the US private equity group and the company delisting from the ASX. In 2020-21, Virgin is expected to retain a 21.6% market share in the Domestic Airlines industry, while Qantas is expected to control 65.1% of the market.

Over 7,200 jobs have been lost across the Domestic Airlines industry over the past two years, representing a decline of 26.3%.

Phoenix Virgin rises from the ashes

The new-look Virgin airlines has emerged from administration with a new operating model. By pursuing the mid-market, below the premium offerings of Qantas but above the budget deals provided by Jetstar, Virgin hopes to carve out a 30% share of the domestic air travel market.

‘Virgin’s target market now appears to be budget-conscious travellers that are still willing to pay a bit more for extra perks, such as lounges, faster check-in and enhanced digital technology on-board,’ said Mr Youl.

Business travel will likely change in the wake of the COVID-19 pandemic, with corporate travellers more likely to be price conscious and conservative in terms of how much they travel. This factor may provide an opportunity for Virgin to attract customers that are unwilling to pay for the premium services offered by Qantas.

Consumers to benefit from cheap air travel

As planes return to the skies, consumers will likely benefit from price discounting as airlines seek to get passengers back onboard.

‘Some price discounting deals are anticipated for both domestic and international travel in coming months, particularly as airlines seek to recapture their pre-pandemic market share. However, overall ticket prices may increase over the next year, as airlines will need to assure per-flight profitability,’ said Mr Youl.


Air passenger movements through capital city airports are expected to decline by 34.3% in 2020-21, to 64.5 million. In 2021-22, passenger movements are anticipated to rebound by 51.6%, to 97.8 million. Air travel is set to grow, rising at an annualised 14.6% over the five years through 2025-26, to total 127.7 million passenger movements. Domestic passengers make up the majority of city airport movements.

While the Domestic Airlines industry has suffered major losses in 2020-21, average profitability is projected to rise to 8.0% of industry revenue by 2025-26. Revenue is also anticipated to rise, but remain below the revenue peak of 2018-19.

‘The Australian Tourism industry is forecast to grow at an annualised 6.4% over the five years through 2025-26, as travel demand rebounds in the wake of the COVID-19 pandemic. Overall, revenue for domestic airlines is anticipated to rise at an annualised 15.3% over the same period, to total $13.3 billion in 2025-26,’ said Mr Youl.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647