Rex Airlines has announced it has gone into voluntary administration and cancelled all flights between major airports.
A statement posted on Rex's website late on Tuesday said Regional Express Holdings Limited and a number of its subsidiaries under the Rex Group have entered voluntary administration.
The airline's shares went into a trading halt this week following recent boardroom turbulence and multimillion-dollar earnings losses.
Experts say a lack of competition in several Australian industries allows companies to drive up prices for customers and act in their own interests to shut out competitors.
What does competition refer to and how does it affect consumers?
Greg Jericho is the chief economist at think tank the Australia Institute.
He told SBS News when companies are "forced to actually compete with other companies, that drives them to either deliver better services or lower prices or a combination of both."
"It's better for customers, for households, because they have more choice, they can actually influence company behaviour because they can choose where they shop, they can choose what services they use, and if businesses find that they're losing customers, that they will do what they can to try and improve it."
A price gouging inquiry initiated by the Australian Council of Trade Unions found Australians are continuously overcharged and subjected to “profit push” pricing by major corporations who face a lack of competition, resulting in higher inflation and worsening the cost of living pressures.
"The fact that there is a quite widespread lack of competition in Australian markets means that pricing practices that might be accepted in very competitive markets are unduly exploitative of consumers in that setting,” the inquiry's report, which was published in February, found.
Why has Rex struggled?
While Prime Minister Anthony Albanese says the government would consider proposals to save Rex, opposition transport spokesperson Bridget McKenzie accused the government of dithering over reforms to aviation, perpetuating a lack of competition in the sector.
"It is time this government pulled its head out of the sand and starts pulling on the levers to foster more competition, better reliability and more affordable airfares in Australia," she said in a statement.
"Two aviation companies control more than 93 per cent of the domestic space and companies like Rex create more competition, which means cheaper airfares across the board."
Rob Nicholls is an associate professor and policy expert at the University of Sydney.
He told SBS News the challenge Rex created for itself was to compete directly with Qantas and Virgin on city routes, when it was established initially to only fly regionally.
"You've got one major airline, one challenger airline that is strong and well funded and it's just hard for a third player to compete directly when there's a limited number of people who want to fly between places."
Nicholls said that big players in the airline industry can change their strategies very quickly, offering more flights and lower fares.
"Rex had a challenge in being the new entrant on those routes and with a high cost base. We've already seen Bonza, its major issue was that the cost of leasing aircrafts was very high and it's precisely the same aircraft or aircraft type that Rex has leased for those big city routes."
Just 15 months after its maiden flight, budget airline Bonza after abruptly cancelling flights across the country.
It followed other failed airlines, Compass, Ansett, OzJet, Air Australia, and Tigerair, that have all failed to take off in Australia long-term.
For decades the federal government had a two-airline policy, which created a mandated duopoly between the two major carriers Trans Australia Airlines (later Australian Airlines) and Ansett, which charged the same fares on identical routes.
It was not until October 1990 that then-prime minister Bob Hawke's Labor government deregulated the aviation industry, opening the door to competition.
Jericho said in the airline industry, as well as supermarkets and banking, small players struggle and big companies make things more difficult for them.
"With major players, they are less worried about competing with each other and more concerned about ensuring that no new competitor comes in and upsets the balance that they have," he said.
How does it become hard to compete with duopolies?
Jericho said an example of how dominant companies make it harder for new entrants is by temporarily lowering prices.
"You might think (lowering the prices of flights) is a good thing for consumers, but they're only doing it temporarily to ensure that a newer player can't get a foothold. And then when the newer player goes away, the prices go back up to where they were and the companies make their massive profits."
What these companies are doing is not illegal and differs from illegal collusion, which is illegally cooperating to manipulate the market and deceive customers.
Consumer laws do not allow the government to break up dominant duopolies or oligopolies.
Large companies also have "the efficiencies of scope and scale," which benefit customers, Nicholls said.
"Australian competition law says if you can get to be a monopoly because you're really good and you attract customers, well that's what capitalism's all about and we're not going to do anything about it."
How does Australia compare to other economies?
Jericho said Australia has one of the least competitive supermarket industries and one of the least competitive banking sectors in the world.
This is partly due to what economists call "economies of scale" which informs the idea that Australia's population is too small for many companies to successfully compete for customers, he said.
"Our four banks are very dominant and they are among the most profitable banks in the world. That doesn't need to be the case," he said.
However, Nicholls argued that Australian industries are similarly competitive to those in similar-sized countries and that we have the added complication of very long supply chains.
He said that, unlike other countries, Australia is "more concentrated in banks than many other economies and partly because our bank lenders lend both commercially and for housing."
With Australian Associated Press.
