In the times of record profit margins for airlines and continuing decline in cost of jet fuel, why are Australian’s still being stuck with air fares that are in some cases surging over 50 per cent to what they were pre pandemic?
Profit maximisation is what some experts are linking the continued high fares with, and with Qantas predicting a ‘whopping profit‘ in the second half of this year, they might just be right.
Recent data from online flight search engine, Kayak highlights the average return airfare in economy from Australia is now $1,827, compare with $1,213 in 2019, a price increase of over 50 per cent.
Domestic ticket prices are up a more manageable 10 per cent over the same time frame.
“Airlines have still not returned to flying internationally at their pre-Covid capacities, and they’re aware of how strong demand is,” aviation analyst and former chief economist at Qantas, Tony Webber told The Guardian.
“They’re recovering capacity and bringing down air fares, but they’re doing it passively and slowly because they know they’re making money.”
Webber says the link between fuel and ticket prices has always been an issue, with carriers generally raising prices alongside rising oil costs, however they act with less urgency when fuel prices begin to drop.
“It’s a perfectly rational business decision for the airlines, especially those who lost money during the pandemic,” said Webber.
“You can’t just look at one year and say it’s price gouging, you’ve got to look at it over five or 10 years, because airlines will try and make money while the sun shines because they know it won’t last for ever.”
Fuel prices shot up in 2022 and due to supply chain issues as a result of Russias invasion into Ukraine, peaking between May and September, but have now dropped by between 35 and 50 percent.
Airfares, especially in Australia, have not followed suit.
Analysts expect the cost of an international flight to remain high as seat capacity increases and demand for travel begins to ease, while competition watchdogs have warned against holding back additional capacity to keep airfares high and the ACCC continues to monitor domestic fares.
