Life Travel Australian airfares soar to near the top of the world’s most expensive
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Australian airfares soar to near the top of the world’s most expensive

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Put another way, we are the 69th least affordable, according to the 2017 Flight Price Index.
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Australia is the 12th most expensive country to catch a flight, according to online travel agency Kiwi.com’s second annual flight price index.

In other words, Australia is the 69th most affordable country to fly from – with the average flight costing $39.45 ($US29.39) per 100 km travelled.

Australia’s ranking slipped five places against last year’s results.

This index is the result of research conducted by Kiwi.com, which compares the cost of domestic and international air travel across 80 countries.

Kiwi.com said the purpose of its index is “to help make travellers aware of countries that offer good opportunities for affordable travel”.

To calculate the rankings, Kiwi.com analysed over a million flights from each country to find an average price of short-haul and long-haul flights, on both low-cost and full-service airlines.

Key points:

  • The average cost of a flight from Australia, per 100km, is $39.59 ($US29.39).
  • Australia’s higher wages, airport monopolies and Virgin-Qantas duopoly result in higher flight prices.
  • Malaysia is the cheapest country for flights, while Belgium is the most expensive.

In first place, Malaysia was crowned the most affordable for flights – the average price was $5.63 ($US4.18) per 100 km of travel.

Among the top 10 cheapest countries (after Malaysia) were Bulgaria, India, Turkey, Romania, Indonesia, Portugal, Thailand, Sweden and Spain.

So which nations were more expensive than Australia for air travel?

That honour goes to Belgium (ranked last or 80th) – at $73.55 ($US54.63) per 100 km travelled.

Rounding up the top 10 most expensive countries are the Netherlands, Qatar, Chile, United Arab Emirates, Solomon Islands, Serbia, Austria, Lebanon and Oman.

Cheapest countries to fly from:

cheapest flightsSo why are Australian flights so expensive?

Higher labour costs

“Labour costs make up about 30 per cent of total flight costs,” said Dr Tony Webber, the CEO of Airline Intelligence & Research and a former Qantas chief economist.

Indeed, many of the top 10 most affordable countries flights in Kiwi.com’s index are ones where their workers earn relatively low wages – such as Malaysia, India, Romania and Thailand.

Australian wages are much higher.

The International Labor Organization (ILO) found that Australia’s real average wages have grown by 10 per cent in the past decade.

labour costs oecd

The United States had much slower wage growth (at 5 per cent), while real wages actually declined in Japan, Italy and the United Kingdom, (by 2, 6 and 7 per cent, respectively).

So how do they rank on the flight price index?

Japan was ranked 13th for affordable flights, followed by Italy (21st), the UK (27th) and the United States (30th).

So, there does appear to be some correlation between a country’s wage levels and growth and flight prices.

However, there are other factors aside from relatively higher wages that make Australia’s flights more expensive than many other countries.

Not much competition in Australia

“Australia will be quite expensive relative to other countries because we have a more concentrated aviation market,” Dr Webber said.

“It’s a duopoly in the Australian domestic market – dominated by Qantas and Virgin.”

Hence, with minimal competition, there is no incentive to drive prices lower.

By comparison, the United States, ranked higher than Australia for flight affordability (at 30th place), has a very competitive airline market.

The US has around 18 carriers, including American Airlines, Delta Air Lines, JetBlue, United Airlines and Virgin America.

According to Dr Webber, another factor driving up Australian flight prices is the lack of airport options for passengers.

“Australia has a small but sparse population, and our airports are very concentrated,” Dr Webber said.

“Effectively, Sydney and Melbourne airports are monopolies.”

This is a sharp contrast to the US and UK aviation markets.

For example, London has six airports, including Heathrow, Gatwick, Stansted and Luton, while New York passengers can choose from John F. Kennedy, LaGuardia and Newark.

Why is New Zealand doing better?

An interesting result is that New Zealand ranks far higher than Australia for flight affordability (at 17th place).

Once again, the cost of labour is one reason behind our Kiwi neighbour’s better ranking.

“New Zealand’s labour unit costs are lower than Australia, around 20 per cent, and they have more aggressive domestic competition,” explained Dr Webber.

“Whereas Air New Zealand used to be a monopoly, they are facing more intense domestic competition from Jetconnect.

“There is also very strong competition in the Tasman – to and from Australia.”

New Zealand’s geography is much smaller than the Australian continent, hence the “shorter sector lengths” in New Zealand result in cheaper prices.

Dr Webber also said competition from people who “choose to drive” is another reason which pushes down New Zealand flight prices.

Driving between Sydney, Melbourne and Brisbane and, particularly, Perth takes a long time.

“But New Zealanders can easily drive to airports in Auckland, Wellington and Christchurch,” Dr Webber observed.

“It’s a smaller geography, and they’re nice drives.”

– ABC

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