Airfares Stay Low as Travel Demand Increases

Airfare prices are rising more slowly than the cost of everyday goods, which continues to support Australians' enthusiasm for travel. However, increasing jet fuel prices and ongoing competition could limit how long this trend lasts. Recent data shows airline tickets are increasing at around half the rate of overall inflation, keeping flights relatively affordable despite broader cost-of-living pressures.

Since 2019, before the pandemic, airfare increases have remained modest, especially when compared to spikes in food and fuel prices. Analysis by Cirium for Flight Centre shows that international economy fares have risen just 12% to an average of $946 one way, while business-class fares have climbed only 7%. Domestic fares have gone up slightly, from $203 to $220. By contrast, a two-litre bottle of milk now costs $4.40, an increase of 83%, while petrol costs 35% more per litre.

Flight Centre’s corporate travel division points to a softening market over the past year as the reason for slower fare increases. Prices surged when borders first reopened, with Brisbane to Singapore flights hitting $1120 in 2021, but they have since fallen to about $686. Flights from Sydney to Wellington have dropped from $441 to $261. Even with jet fuel prices increasing 25% since 2019, competition among airlines and more rational pricing have helped limit airfare growth.

Looking ahead, ticket prices are expected to stay fairly stable, with only moderate increases predicted during peak travel periods such as holidays. Strong competition among domestic airlines and tight pricing pressure on international routes are likely to prevent major fare hikes. A steep drop in prices is also unlikely.

Meanwhile, airline loyalty programs are evolving to offer passengers more flexible ways to use points. Virgin Australia now lets frequent flyers redeem points during flights on food and drinks by linking their accounts to eligible Visa cards. Although this method offers a lower redemption value than using points for flights, it appeals to passengers interested in spontaneous in-flight purchases.

Source: BITRE, Travel Weekly Asia, Never Ending Footsteps