Inquiry into airfares in WA

[Berealgetreal]

From "The Australian" a short while ago.

Inquiry begins into high WA plane fares

Australian Associated Press
11:17AM June 20, 2017

A parliamentary inquiry into the high prices of regional airfares in Western Australia will be carried out, amid long-held complaints that it costs more to fly within the state than to the east coast.

The Economics and Industry Standing Committee will report on what is contributing to the current high cost of regional airfares and the impact that has on the regions from a business, tourism and social perspective.

"A parliamentary inquiry has the power to shine a spotlight on this issue, get to the bottom of why these fares are so expensive and give airlines the opportunity to provide solutions," Tourism Minister Paul Papalia said.

[unobtanium]

3 years and 20million dollars later, the answer is "Supply and Demand".

[Snakecharma]

When it costs more to catch a cab to the airport than it does for a flight it distorts the perception of the average punter.

The cost of airfares in WA would, I suggest, be reflective of the cost of production rather than be indicative of any attempt by either of the two major airlines to rip off the travelling public in WA.

You only need to look at the dismal performance of both carriers - one more dismal than the other - and you can easily see that they are not charging what they need to charge to cover their costs and make a proper return on invested capital.

I doubt though that this would be a prevailing review of any parliamentary inquiry who are just there to grand stand and beat their own chests.

[Deano969]

Which begs the question ...
Primarily there are only QF and VA plus their fully owned LCC divisions
So on that "duopoly based structure" why are they both not charging reasonable fares on domestic operations
Understandably there is more competition on international sectors, but even many that VA operate have little aggressive competition

Imagine if you will, a true LCC setting up here in Oz and what it would do to VA
Likely the same as what VA, Compass and Impulse did to Ansett

Without going down the road of colluding or price fixing, little would need to be done to have a strong domestic duopoly

Say VA with their fleet of 110 odd frames added just $2 per domestic sector
110 frames
100 pax average (probably higher as most are 180+ seats)
5 sectors per day
365 days per year
$20 million per year
Or add $5 and it's $50 million

This would go an awful long way to getting them into the black

[troppo]

Which begs the question ...
Primarily there are only QF and VA plus their fully owned LCC divisions
So on that "duopoly based structure" why are they both not charging reasonable fares on domestic operations
Understandably there is more competition on international sectors, but even many that VA operate have little aggressive competition

Imagine if you will, a true LCC setting up here in Oz and what it would do to VA
Likely the same as what VA, Compass and Impulse did to Ansett

Without going down the road of colluding or price fixing, little would need to be done to have a strong domestic duopoly

Say VA with their fleet of 110 odd frames added just $2 per domestic sector
110 frames
100 pax average (probably higher as most are 180+ seats)
5 sectors per day
365 days per year
$20 million per year
Or add $5 and it's $50 million

This would go an awful long way to getting them into the black

I like your argument and mathematics.

[Berealgetreal]

This will no doubt lead to the request for Batik/Air Asia etc on domestic routes.

[Berealgetreal]

Say VA with their fleet of 110 odd frames added just $2 per domestic sector
110 frames
100 pax average (probably higher as most are 180+ seats)
5 sectors per day
365 days per year
$20 million per year
Or add $5 and it's $50 million

This would go an awful long way to getting them into the black

I think thats what the new guy is doing in a round about way.

[GoldCoastTobacconist]

A guy recently came into my store and told me about his recent trip to Broome and how quiet town was. After serving him it was a bit quiet with the cooler weather and I looked into it.

The fee's charged with the following information loads : LW 66T 170pax (incl 20 Children) Arriving and Departing. Passengers last year DOM

Broome $10 329.90
308 856 pax last year

Alice Springs $9472.46
602 865 pax last year

Cairns $6205.68
4 100 948 pax last year

Acknowledgement the difference in passenger figures but sorting out these fee's may well see more airlines on more routes being able to reinvigorate towns.

[Ex FSO GRIFFO]

'Regional' flights 'within' WA is the basis of the enquiry, I think.

i.e. It can cost 'an arm' for a flight to Albany, Esperance, Kal or Broome at, say, Easter, than a week prior to or after......

Why? That is the question.

You may quote 'supply and demand' - but - there is something just not quite 'right' at times....

No cheers, Nope, None at all.....

[Deano969]

'Regional' flights 'within' WA is the basis of the enquiry, I think.

i.e. It can cost 'an arm' for a flight to Albany, Esperance, Kal or Broome at, say, Easter, than a week prior to or after......

Why? That is the question.

You may quote 'supply and demand' - but - there is something just not quite 'right' at times....

No cheers, Nope, None at all.....

Short answer

In WA if you are going to fly, the airline knows the cost is somewhat irrelevant as you have limited options
Same as regional NSW and QLD

East Coast and trunk routes have the volume to support LCCs that are there primarily to stave off foreign or new entities entering the market and hurting VA and QF, so there is some downward price pressure on these routes

There simply is not enough volume on WA regional routes from "walk up" passengers to sustain a Jetstar or Tiger or a new start up from jumping in

Keep in mind most of the routes and frequencies are only there because of the mining companies filling a majority of the seats (likely at those super discounted fares you allude to) and the few seats that are left over are sold on to the mug punter at what ever price they desire

[Pavement]

A guy recently came into my store and told me about his recent trip to Broome and how quiet town was. After serving him it was a bit quiet with the cooler weather and I looked into it.

The fee's charged with the following information loads : LW 66T 170pax (incl 20 Children) Arriving and Departing. Passengers last year DOM

Broome $10 329.90
308 856 pax last year

Alice Springs $9472.46
602 865 pax last year

Cairns $6205.68
4 100 948 pax last year

Acknowledgement the difference in passenger figures but sorting out these fee's may well see more airlines on more routes being able to reinvigorate towns.

That's all nicely quoted and the same trap as a certain red haired politician. The figures you quote are for an arrival and departure (ie 340 passengers - I worked it out myself to confirm it). As such, the difference between Broome and Cairns works out $12.19 per passenger. An airfare from Broome dct Melbourne is well over $1000. Cairns dct Melbourne is generally under $200. So that's a difference of $787.81 for a slightly longer flight from Broome.
A lot of trying to shift the blame.

[Pavement]

In the interest of fairness I did a fare scrape after I wrote this. More like $800 Broome dct Melbourne and between $180 and $350 for Cairns dct Melbourne on a random day outside school holidays.

[neville_nobody]

When it's $2 per km in the cab to the airport but circa 20 cents per km in the aeroplane (which is completely user pays unlike the cab) I think they are investigating the wrong form of transport.

Then there's the absolutely stupid airport charges in this country.........

[Deano969]

In the interest of fairness I did a fare scrape after I wrote this. More like $800 Broome dct Melbourne and between $180 and $350 for Cairns dct Melbourne on a random day outside school holidays.

Melbourne to Broome is just a few flights per week QF

Melbourne to Carins
5 Direct flights per week across all major carriers + all the indirect flights

If you want to compare Broome to Melbourne better to compare it with a similar route such as Brisbane to Mount Isa

[morno]

Brisbane to Mount Isa, there's another hugely ripped off route.

I have lived in Mount Isa and I continue to have housing interests in Mount Isa, and I can tell you now that if it were an in demand route, then Qantas wouldn't be cutting flights and downsizing the aircraft. So you can't tell me that it's so flippin' expensive to fly that route simply because of supply and demand.

$2,000+ return for a family of 2 adults and a child with over 6 months lead time 😡.

Go on, keep telling me that's fair when I could pay a shedload less for a longer flight to other parts of the country, or even the world.

Not everyone in those parts of the country earn mining salaries.

morno

[Tankengine]

Brisbane to Mount Isa, there's another hugely ripped off route.

I have lived in Mount Isa and I continue to have housing interests in Mount Isa, and I can tell you now that if it were an in demand route, then Qantas wouldn't be cutting flights and downsizing the aircraft. So you can't tell me that it's so flippin' expensive to fly that route simply because of supply and demand.

$2,000+ return for a family of 2 adults and a child with over 6 months lead time 😡.

Go on, keep telling me that's fair when I could pay a shedload less for a longer flight to other parts of the country, or even the world.

Not everyone in those parts of the country earn mining salaries.

morno

You seem to contradict yourself.
It IS supply and demand, the demand is low so they cannot fill aircraft so fares go up.
If you think Bne -Mt Isa is expensive try Bne -Winton, or Bne - Richmond! ;)
Supply and demand works both ways.

[Pavement]

Melbourne to Broome is just a few flights per week QF

Melbourne to Carins
5 Direct flights per week across all major carriers + all the indirect flights

If you want to compare Broome to Melbourne better to compare it with a similar route such as Brisbane to Mount Isa

I only used those routes because Broome and Cairns were quoted in the post. I then wanted them to a common point.

I understand supply and demand. The point is that the difference in airport charges works out to $12.91 a passenger. It is a contribution but not the main driver in the high fares.

[robyeah]

Last time i tried to fly perth to kalgoorlie on sunday afternoon QF was $699 a seat. Similar fares on friday afternoon going the other way...

[morno]

You seem to contradict yourself.
It IS supply and demand, the demand is low so they cannot fill aircraft so fares go up.
If you think Bne -Mt Isa is expensive try Bne -Winton, or Bne - Richmond! ;)
Supply and demand works both ways.

But even when they were operating 737's that were getting emptier with the mining downturn, there was never any 'cheap' fares like you would expect.

Charging exhorbinant airfares just because people have little choice is ethically wrong. Why should they be penalised for living in remote parts of the country?

morno

[Ixixly]

Supply and Demand is only part of it. They need to have staff there, some of whom are working on Full-Time undoubtedly, those costs for their wages are spread amongst far less passengers than at other larger airports.

They're operated by Contractors such as Alliance etc... so Qantas and Virgin need to make their cut and then so do the people who hold the Contracts.

Add in the fact that they know their main customers are likely from the mining sector who are on good coin or having their travel paid for or subsidised by the Company, so they know they add a little on the top as well. Rather like Property in Darwin where they know the Defence Force often subsidises it so prices that would otherwise be laughed at in most of the country don't look as bad.

This inquiry really is laughable to say the least I think, unless there is some kind of evidence of collusion between the majors in terms of the prices there really is nothing that can be done, they can't demand that they lower the prices so their only real option is to try and give incentives for other operators to have a go and add a bit of extra competition! Certainly doesn't require the money and expense of an inquiry to work that out does it?!

[topend3]

What the inquiry, even though I feel it is a bit of a waste of time and money, may find, is that a high % of an airline's cost is airport and screening fees. The same councils that moan about high airfares are happy to have high airport charges, some of the revenue which goes back into town to fund projects that are non airport-related.

Apparently the Esperance council recently did a deal with Rex to negotiate a special discounted fare for locals, with lower fees and charges as an incentive. This is the sort of pro-active arrangement that could help to lower the cost of airfares.

[Tankengine]

But even when they were operating 737's that were getting emptier with the mining downturn, there was never any 'cheap' fares like you would expect.

Charging exhorbinant airfares just because people have little choice is ethically wrong. Why should they be penalised for living in remote parts of the country?

morno
You speak like they are a Government department. ?
The Airlines are there to make money, end of story.
Real Estate costs in the regions is a fraction of that in Sydney, transport costs are greater.

[Icarus2001]

“A rule of government is never look into anything you don’t have to, never start an enquiry unless you know what its findings will be.”

Something applicable from Yes, Minister c 1982

[Ex FSO GRIFFO]

Re .."Last time i tried to fly perth to kalgoorlie on sunday afternoon QF was $699 a seat. Similar fares on friday afternoon going the other way... "


'Tis only a 7 hour drive mate.....done it many times, both ways, and used my own car when I got ...

(a) - To Work, and
(b) - Home

Until I got the family 'squared away'.

So, If you fancy your time at $100 per hour, take the 'scenic route' and drive....

Cheerrrsss....:cool:

[ExXB]

Pricing is an art not a science. It isn't, and frankly cannot be, cost plus a reasonable profit.

The magic price for anything is what the punters are prepard to pay. Charge anything more, you spill customers. Charge anything less and you have lost an opportunity. Figure out the maximum that they will pay, deduct all the government fees and charges, and what is left is your fare. And customers are prepared to pay more on thin and/or monopoly routes.

If you drop your fare 10% you need to increase your pax count by 10% just to break even. If you halve your prices you need to more than double your pax count. This just isn't going to happen on thin routes like this.

[Chris2303]

PER-KGI SUN 25JUN at 0900: $245.00

[Derfred]

Charging exhorbinant airfares just because people have little choice is ethically wrong. Why should they be penalised for living in remote parts of the country?


The price of almost everything increases (sometimes dramatically) in remote parts of the country.

Why should private airlines be a charity?

If you drop your fare 10% you need to increase your pax count by 10% just to break even. If you halve your prices you need to more than double your pax count. This just isn't going to happen on thin routes like this.

Umm... no.

[topend3]

The airlines that contribute to this enquiry will only be too happy to outline their operating costs which are substantial to most of these places, and how they need to charge a fare to make a profit, as they are a business. And politicians won't really be able to argue with that. Which is why the whole thing is a waste of money. Regulation of most of these routes has also provided some towns with an air service that otherwise they may not have.

[tomcat264]

From "The Australian" a short while ago.
What to people expect? larger aircraft are cheaper to run per seat per mile. You can compare a dash 8, 146, f100 to a 777 or a330 in the per seat per mile figures.

[tomcat264]

When it costs more to catch a cab to the airport than it does for a flight it distorts the perception of the average punter.

The cost of airfares in WA would, I suggest, be reflective of the cost of production rather than be indicative of any attempt by either of the two major airlines to rip off the travelling public in WA.

You only need to look at the dismal performance of both carriers - one more dismal than the other - and you can easily see that they are not charging what they need to charge to cover their costs and make a proper return on invested capital.
I doubt though that this would be a prevailing review of any parliamentary inquiry who are just there to grand stand and beat their own chests.
Thats why VARA dumped some routes they werent making any profit

[tomcat264]

This will no doubt lead to the request for Batik/Air Asia etc on domestic routes.
They would have to have Australian registered aircraft.
If your going to go down that road EK could do it with enough capital to wipe out both QF & VA

[tomcat264]

In the interest of fairness I did a fare scrape after I wrote this. More like $800 Broome dct Melbourne and between $180 and $350 for Cairns dct Melbourne on a random day outside school holidays.
Ansett & TAA were charging $840 return PER- SYD 30 years ago

[tomcat264]

Brisbane to Mount Isa, there's another hugely ripped off route.

I have lived in Mount Isa and I continue to have housing interests in Mount Isa, and I can tell you now that if it were an in demand route, then Qantas wouldn't be cutting flights and downsizing the aircraft. So you can't tell me that it's so flippin' expensive to fly that route simply because of supply and demand.

$2,000+ return for a family of 2 adults and a child with over 6 months lead time 😡.

Go on, keep telling me that's fair when I could pay a shedload less for a longer flight to other parts of the country, or even the world.

Not everyone in those parts of the country earn mining salaries.

morno
The bigger the plane the cheaper the seat per mile end of story

[Traffic_Is_Er_Was]

Provided all the seats are full.

[BNEA320]

They would have to have Australian registered aircraft.
If your going to go down that road EK could do it with enough capital to wipe out both QF & VA
why on earth would you want an OZ registered aircraft ? A New Zealand registered aircraft with a NZL AOC is far superior for domestic OZ ops. Far less to do with CASA. (think you might only have to tell CASA what you're dong, not ask for any "permissions. Please correct me,if I'm wrong)

Also, remember during pilots dispute, foreign carriers were allowed to sell seats domestically in OZ. It only takes a stroke of a pollies pen.

[WingNut60]

TV news this evening showing BME - PER business fares this coming weekend at $5 - 6000. Yes, that's one way.
End of school holidays and all flights are heavily booked.

The truly disturbing thing about this is that, if history is any indicator, those seats will all be taken by pollies and their families on tax-payer funded jaunts.

[Fatguyinalittlecoat]

Via Melbourne. As anybody who wants to buy a ticket this weekend are too late as people with more foresight and planning have already bought their tickets and now there are none left. Typical click bait bull****.

[Sunstrand]

My favourite thing about this topic is when you read about people complaining about airfares to regional towns being so high and that they could pay the same or less to go from a capital to capital.

A classic example is Rex! people say the air fares from Mount gambier are too high to go to Melbourne or Adelaide. I Think it may be to do with 34 seats over 200nm compared to 180 seats over 400nm, especially if you are only half full or less!

[Band a Lot]

Ansett & TAA were charging $840 return PER- SYD 30 years ago



Sure that's not a one-way fare? Carnarvon - Perth in 1985 was around $940 return in the Ansett F28.

[Icarus2001]

that a high % of an airline's cost is airport and screening fees.

Not really.

http://www.ascendforairlines.com/sites/all/themes/ascenddigital/_media/articles/62/sprite-2.jpg

[Band a Lot]

Depending on a number of things including aircraft type and flight time, these numbers don't seem anywhere near correct.


Maintenance, "flight?" and passengers all cost 7% of the flight/s.
it also costs the same to crew the aircraft, as to buy it at 14% of the flight/s.
Fuel seems cheap at only 29% of the flight charge.
and ground costs are grater than maintenance costs.


If crew (pilots and cabin) divvy up 14% of the ticketed income of a flight, why do they often claim low pay rates?

[Icarus2001]

If crew (pilots and cabin) divvy up 14% of the ticketed income of a flight, why do they often claim low pay rates? that is an erroneous conclusion. We are talking about COSTS not INCOME.

Research all you like, figures generally come back about the same.

Depending on a number of things including aircraft type and flight time, these numbers don't seem anywhere near correct.

Why would A320 verus B737 make a difference of much?

Do you have experience of managing airline costs?

[Band a Lot]

that is an erroneous conclusion. We are talking about COSTS not INCOME.

Research all you like, figures generally come back about the same.



Why would A320 verus B737 make a difference of much?

Do you have experience of managing airline costs?



Mate you drop a graph that could be for an ATR 42 and only 1 in the fleet for all that graph says.

Is it a turbo prop fleet or a 777 or an A380 fleets?

Never been able to match numbers on a Metro III to a B747 on any sector ever!!

But you say the figures come back the same - how about an explanation on what is classed as costs and or income and what is actually included in your graph and its costs or incomes.




Or at least say "total cost" of what.

I do probably have some relevant experience in airline cost and also in management in aviation and their costs, but no I have not managed an airline.

Seem the % that do manage airlines around the World fail big time if stats are used.

I still say for most companies and most routes these numbers are way off the mark. I doubt Qantas and Ryan Air have a 7% cost each for "passengers" even if on a A320 and/or a B737 on the same route or a similar route in respective current sectors they run.

[Icarus2001]

Never been able to match numbers on a Metro III to a B747 on any sector ever!!

Just to be clear, you do understand what a percentage means right?

[Band a Lot]

Just to be clear, you do understand what a percentage means right?

Yep if x % of seats are not filled on a certain sector you will go broke.


The introduction of the regional jets altered the sales picture. Although more expensive than turboprops, regional jets allow airlines to operate passenger services on routes not suitable for turboprops. Turboprop aircraft have lower fuel consumption and can operate from shorter runways than regional jets, but have higher engine maintenance costs, shorter ranges, and lower cruising speeds.
The market for new aircraft to replace existing turboprops once again grew in the mid-1990s, and DHC responded with the improved "Series 400" design.
When world oil prices drove up short-haul airfares in 2006, an increasing number of airlines that had bought regional jets began to reassess turboprop regional airliners, which use about 30–60% less fuel than regional jets. Although the market was not as robust as in the 1980s when the first Dash 8s were introduced, 2007 had increased sales of the only two 40+ seat regional turboprops still in western production, Bombardier's Q400 and its competitor, the ATR series of 50–70 seat turboprops. The Q400 has a cruising speed close to that of most regional jets, and its mature engines and systems require less frequent maintenance, reducing its disadvantage.

*** So why is it Virgin ATR's are resting ,while Qantas Q400's are not? If the "%'s" are the same?

I also am sure a B747 and a Metro III will have much different costing's on the Sydney to Joberg flights - even more so if both have every seat fully booked.

[Band a Lot]

The Airbus A380, the largest passenger jet, costs between $26,000 and $29,000 per hour, using roughly $17,467 of fuel.

Now this seems greater than the graph %!

Aircraft Operating Series ? Aircraft Operating Expenses » OPShots.net - Cyberhub to Cleveland Aviation and the World! (http://www.opshots.net/2015/04/aircraft-operating-series-aircraft-operating-expenses/)

[BNEA320]

The Airbus A380, the largest passenger jet, costs between $26,000 and $29,000 per hour, using roughly $17,467 of fuel.

Now this seems greater than the graph %!

Aircraft Operating Series ? Aircraft Operating Expenses » OPShots.net - Cyberhub to Cleveland Aviation and the World! (http://www.opshots.net/2015/04/aircraft-operating-series-aircraft-operating-expenses/)

the opening statement in this article ...........

"Would you believe that over 102,000 commercial passenger flights circle over our heads every day? These planes alone cost somewhere between $70 million and $404 million dollars, and are operated by just a handful of airlines" doesn't seem to take into a/c that used aircraft sometimes go very cheaply (sure their maintenance costs are higher) like MD80's/F100's for $1-2 million. Allegiant Air(USA) boasted how little they paid for each MD80, due to glut in the market & at one time, they even bother flying them, on days like Tuesday, when low demand, whereas new aircraft had to be worked hard. There were a lot of old aircraft flying around WA last time I looked. No MD80's, but plenty of Fokkers/Dash 8's etc. which were mainly long in the tooth.

Imagine the Jetgo ERJ's must also be cheap to lease due to the apparent glut of them parked in deserts in USA.

[Band a Lot]

Simply saying the pie graph while may be close for 1 specific operation - it seems pretty much rubbish for most.

The numbers(%) can never be pretty much the same over the aviation sector across the World - there are so many variables.

Low capacity, turbo prop, 4 engine are massive cost differences.

Depending on the actual flight and load numbers a Metro III can be far cheaper to use than a B747 (8 people Melb to Syd) - But on other flights and loads it is the opposite (250 people Syd to London).