The Australian Competition and Consumer Commission is closely monitoring the domestic airline industry as the escalating Middle East conflict threatens to drive up local ticket prices.
According to the latest Domestic Airline Competition report, while the immediate impact involves international route diversions and airspace closures, the flow-on effects to Australia's internal market are becoming increasingly evident through surging global jet fuel costs.
ACCC Commissioner Anna Brakey noted that while major carriers typically hedge fuel to insulate against short-term volatility, prolonged price elevations will inevitably increase operating costs.
"This could ultimately lead to higher domestic airfares," Brakey warned, noting that shifted passenger demand toward Asian hubs is already placing upward pressure on capacity-constrained routes.
The report also highlights a "concerning lack of competition," with the Qantas Group (ASX:QAN) and Virgin Australia (ASX:VGN) servicing nearly 99% of all domestic flights.
Despite this duopoly, service reliability showed mixed results in the January 2026 quarter.
While the industry cancellation rate sat at 2.1%, performance varied significantly; Rex (ASX:REX) and Virgin outperformed averages, while Jetstar lagged with a 67.7% on-time arrival rate.
Regarding consumer rights, the ACCC clarified that Australian Consumer Law protections regarding refunds may not apply if cancellations stem from third-party actions, such as government-mandated airspace closures.