View Full Version : Lower air fares as showdown nears

27th Dec 2003, 03:27
Sat "The Australian"

Lower air fares as showdown nears
By Steve Creedy
December 26, 2003

DOMESTIC air travellers enjoying some of the lowest real discount airfares on record can expect further deals in the new year as cut-price Qantas subsidiary Jetstar and Virgin Blue position themselves for a showdown.

Travellers have already received a taste of things to come - end-of-year sales with fares on Virgin Blue as low as $39 one way for some east coast flights from mid-January. Trans-continental fares in the same sale fell as low as $119 one-way.

More deals are expected as the face-off leading to Jetstar's May launch combines with a continuing need to stimulate travel in the quieter post-holiday period.

Jetstar could reveal its route structure and pricing as early as next month and will begin taking bookings in February.

Both low-cost carriers have vowed to be price leaders.

Centre for Asia Pacific Aviation managing director Peter Harbison expects domestic prices to head downwards from February as Qantas attempts to stimulate travel and arrest Virgin's growth.

He predicts some attention-grabbing fares as Jetstar seeks to influence the market and generate cash flow, although capacity constraints may initially mean many of these are in off-peak times.

"You're going to have another airline with effectively the same yield management system, the same website, so it will be much more directly targeted at Virgin Blue's pricing than Qantas is," Mr Harbison said.

"They will be putting the (low) fares on the market to try and get publicity."

The Bureau of Transport and Regional Economics index of real domestic fares shows discount return airfares in the latest June quarter were the lowest on record, eclipsing even the savage four-airline competition of 2001.

The trend continued into the September quarter with the discount index 9.75 per cent lower than the same period last year and 19.5 per down on September, 1994.

The result was a record low for a September quarter, traditionally a more expensive time to travel than the June equivalent.

But the news was not so good for business travellers and those buying more expensive full economy fares.

The business travel market, where demand is less elastic, has seen a steady climb in the real cost of airfares until a one-way ticket in September was 28 per cent more expensive than in 1994.

Full economy fares have climbed less steeply but were still 11 per cent more expensive than a decade ago.

The BTRE does not have an index for international fares but experts say they are low in real terms.

Deals advertised this week included a Lufthansa round-the-world fare starting from $1779, a Lauda Air return fare to Europe from $1479, an Air New Zealand Los Angles ticket from $1584 return and new Virgin Pacific fares to Wellington or Christchurch starting at $149 one-way.