Cheap tickets vanish into thin air
Wed "Sydney Morning Herald"
Cheap tickets vanish into thin air
By Brian Robins
December 17, 2003
The days of steadily declining air fares have come to at least a temporary halt, with fares for all classes of domestic air travel rising in recent months.
The latest quarterly survey of domestic air fares by the Bureau of Transport Economics shows that business, economy and budget air fares continue to rise, ending a decline in fares since the late 1990s.
The survey uses air fares from 1992 as its benchmark, represented by a figure of 100.
Excluding taxes and charges, the index of the cheapest discount air fares stood at 74 in the September quarter. This compared with the all-time low of 72 reached in the three months to June.
For economy-class travel, the index rose to 111, reaching levels last seen in late 2001, when economy-class air fares rose as airlines sought to offset the impact of the cut-price airlines Virgin Blue and Impulse. Impulse later sold out to Qantas.
The index of the cost of business travel hit 142, its highest level.
In 10 years, the cost of business travel has risen by nearly 40 per cent, with steady rises recorded over the past year.
With only one competitor, Virgin Blue did not need to continually cut its prices, especially if its fares are below those of Qantas, said Richard Wu, lecturer in aviation at the University of NSW.
"As long as it is lower than the competition, it makes money. If [budget] prices are rising it means that either competition is insufficient, or that Qantas is not trying to reduce prices.
"Therefore Virgin Blue doesn't need to reduce prices further to compete with Qantas. With JetStar's launch, we could see renewed pressure on prices."
Qantas is to launch JetStar in February as a low-price carrier aimed at blunting competition from Virgin Blue.
The bureau's data shows that the price of business travel tickets have risen 6 per cent over the past year, well ahead of the rate of inflation, and economy class ticket prices have risen 1.8 per cent.
"I don't think fares have bottomed," said the commercial director of Virgin Blue, David Huttner.
Virgin has introduced a series of initiatives, including mid-week mini-fares aimed at lifting travel numbers at quiet times of the week.
==========================================