Australia’s Discount Airfares Reach A 15-Year High

As airlines in Australia attempted to meet rising demand while also absorbing the costs of higher fuel prices and inflation, domestic flight discounts reached their highest level in almost 15 years in September.

The ‘best discount’ airfare index jumped to 107 in May from just 48 in April, according to newly disclosed BITRE statistics from the department of transport.

The average cost of an airline ticket has risen to 83 points since the beginning of the COVID pandemic in March 2020.

The business is still dealing with employee shortages and uncertainty due to the war in Ukraine, all of which have contributed to the excessive pricing.

According to IATA, jet fuel prices have increased by over 40% in the Asia-Pacific area over the past year and by 85% in North America.

Qantas and Rex said earlier this year that they would be boosting rates to combat the continually rising fuel costs and other operating expenses.

CEO Alan Joyce stated in March that Qantas had hedged around 90% of the fuel it needed until the end of June and 50% of its requirements for the September quarter. However, the company would ultimately need to boost prices to account for its escalating expenses.

He added that “[hedging] provides us time to respond” to the increasing fuel price. “Unfortunately, if we continue at these levels, airfares will have to go up, and we’ll have to pass them along.”

Then, last month, the ACCC disclosed how domestic airlines were drastically cutting capacity to deal with the delays and cancellations brought on by crew shortages and sickness while saving money on fuel.

Even if local industry passenger counts reached 97% of pre-COVID levels in June, the competition watchdog has found a reduction in seats for sale over the past six months.

The ACCC also reported that the industry-wide load factor, or the proportion of seats occupied, grew to 82% in July 2022 due to strong demand and decreased capacity.

This is in contrast to 79% before the pandemic. Flights to Cairns, the Gold Coast, and Darwin, among others, experienced greater than 90% passenger occupancy.

Despite the industry’s widespread difficulties, the local sector has recovered to within 10% of its pre-COVID level of performance. This is even though April, June, and July set new records for delays.

Consequently, Qantas announced last week that it is on track for a stunning post-pandemic comeback. It is now aiming for an underlying profit before tax of up to $1.3 billion in the financial year’s first half.

This is even though in its most recent full-year results, the larger company reported an underlying loss before tax of $1.86 billion and claimed that the pandemic had cost its airlines a total of $7 billion.

Qantas estimates their leisure travel income has risen to almost 130% of pre-pandemic levels.

In a market report released last Thursday, the company said, “The overall operating environment remains complicated with high fuel prices and rising inflation, as well as increasing interest rates hurting consumer confidence.”

The Group’s ability to ultimately recover higher fuel costs through tickets is supported by the fact that “strong demand implies that individuals are prioritising spending on travel above other categories.”

The increase in fuel costs after COVID began is almost 75%, up from 60% in August 2022.

New estimates put Company International’s capacity in the second half of FY23 at 77%, up from 61% before COVID.

The latest information from BITRE is a route-based cost index. It is not a reliable indicator of airline profitability or passenger spending.