Flight Centre has told Jetset Travelworld to be careful of what it wishes for as managing director Graham Turner warned that increased airfares will lead to fewer travellers.
Responding to JTG concerns that heavy discounts of international airfares have led to a decrease in total transactional value, Turner said a hike in fares – which he believes is inevitable – will dampen demand.
“You can’t have it both ways,” the Flight Centre chief told Travel Today. “If fares are high you are not going to see as many people travelling and if they are low the margins are lower. You have to be able to adjust to those sorts of things.”
Lower airfares should be offset by making more on the land component, he argued.
“That’s what we find with cheaper airfares,” Turner said.
He went on: “You go to more expensive fares, which they inevitably will, and the market is undoubtedly going to come off. You’ll have fewer passengers.”
JTG chief executive Peter Lacaze said it was “untested” whether a rise in airfares would materially lessen the desire to travel.
“I just don’t know if it would have that much of an impact on consumer demand,” he said. “Even if fares were 5% higher it would still historically be very attractive. It’s off an incredibly low base.”
Meanwhile, Turner said the online sector, rather than JTG, was now its main competitor.
Flight Centre itself needs
to have a strong online focus,
he said.
“We need to be more productive and make more use of our customers when they come to us,” Turner said.
Dangers of airfare hikes: Turner
