(Bloomberg) -- Qantas Airways Ltd. and other Australian airlines face the prospect of being fined for flight cancellations and delays after a damning assessment of competition levels and customer service by the domestic antitrust watchdog.

The government should consider introducing specific entitlements for passengers whose flights are scrapped or run late, the Australian Competition & Consumer Commission said in its final report on airline competition on Monday. 

The watchdog called for the creation of an independent agency to handle complaints against airlines, describing the existing program to resolve disputes — run by the carriers themselves — as “ineffective.”

The ACCC’s report, after a three-year monitoring program, depicts a domestic airline industry almost entirely in the grip of Qantas and its smaller rival Virgin Australia. The duopoly has led to higher fares and poorer service, while rivals trying to break in are hamstrung by a lack of takeoff and landing slots at Sydney Airport, the watchdog said. 

“The lack of effective competition over the last decade has resulted in underwhelming outcomes for consumers in terms of airfares, reliability of services and customer service,” the ACCC said.

“There is a clear need for a truly independent and external dispute resolution ombuds scheme, which has the power to make binding decisions,” ACCC Chair Gina Cass-Gottlieb said in a statement.

Qantas, which together with Virgin controls more than 90% of the domestic passenger market, described Australia as “one of the most open and competitive aviation markets in the world.” The airline said there’s “downward pressure” on fares since it rebuilt operations after Covid and supply-chain bottlenecks eased. 

Qantas said it provides meals, accommodation and covers reasonable costs if passengers suffer significant delays.

Virgin Australia said it’s focused on improving reliability levels and limiting call wait times, and said its lowest fares are available for bookings made well in advance or during sales.

Suggesting new penalties against airlines, the ACCC pointed to the example of the European Union, where consumers are entitled to compensation for a delay of three hours or more, and refunds for cancellations must be paid within seven days of a scrapped flight.

While aviation worldwide has struggled to cope with a post-pandemic surge in demand, the latest rates of cancellations and delays in Australia have deteriorated and remain worse than historical levels. 

Australian airlines cancelled 3.9% of flights in April, close to double the long-term average of 2.1%. Little more than seven out of 10 flights arrived on time.

Qantas-owned lost-cost airline Jetstar scrapped 8.1% of its domestic flights in April and only 60% of its services arrived on time.

(Updates with Qantas comment in seventh paragraph)

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