Dominant Airlines Thrive Amid Aircraft Shortages

Qantas and Virgin Australia are strengthening their hold on Australia's skies as limited aircraft supply makes it nearly impossible for new competitors to enter the market. This scarcity benefits existing airlines by boosting profitability and reliability, but it is also pushing up airfares and reducing consumer choice.

Currently, Qantas and Virgin Australia lead the domestic market, aided by the exit of smaller players such as Rex and Bonza. New entrants face significant barriers to acquiring aircraft, as global production continues to fall short of soaring demand. Manufacturers are still grappling with supply chain challenges that began during the pandemic, and those issues continue to delay aircraft deliveries.

Industry data shows that aircraft availability in 2023 and 2024 dropped to 31% below demand. At the same time, total revenue for global airlines is projected to decline from over $1 trillion to $979 billion in 2025 due to slower travel growth and reduced fares. Further complicating the landscape, international trade tensions are inflating maintenance costs, and business and student travel remain below pre-pandemic levels.

Market analysts believe that this situation gives a strong advantage to larger airlines that already operate at scale. With fewer planes available, established operators gain priority access and are expanding into regional routes. For example, Virgin is replacing smaller aircraft run by partner airlines with its own larger planes on select routes, increasing both capacity and market reach.

Although this concentration of power may seem negative for travelers, it does offer some benefits, such as better on-time performance and more stable operations. Larger airlines now have the resources to keep spare aircraft and crews available to manage disruptions more effectively. However, with less competition, pricing pressure also weakens, so ticket prices are expected to rise unless fuel costs drop significantly.

Delays in aircraft manufacturing remain one of the industry's biggest concerns. Despite attempts to collaborate with plane makers, airline groups are considering legal action against Boeing and Airbus if production speeds do not improve. Many executives believe the pandemic should no longer be used as an ongoing excuse and are calling for faster, more dependable solutions to resolve these supply constraints.

Source: ACCC, Aviation A2Z, Switzer, Aerotime