Australia’s airlines are flying into a sweet spot with profits at record levels as oil prices collapse and inbound passenger numbers rise with a weak Australian dollar.
But passengers have not been invited to the party with domestic airfares up by at least five per cent in the past 18 months, according to figures produced by the Department of Infrastructure and Regional Development (DIRD).
That could mean an extra $20 on an average economy fare to Sydney from Melbourne, or $6 on a discount carrier fare.
Just 18 months ago, Qantas shocked the markets reporting a $2.8 billion full year loss as it wrote down the value of its international fleet and was slugged by a $253 million fuel bill rise to $4.5 billion.
Qantas rolling in cash
This week, things could not have been more different when Qantas CEO Alan Joyce released the latest half year figures.
Net profit was up 338 per cent to $688 million, compared to $203 million a year earlier, with falling fuel prices adding $448 million to revenues.
Over at Virgin Australia, things are also looking bright. Two weeks ago, CEO John Borghetti, a defector from Qantas, announced an eightfold rise in first-half profit to $81.5 million with falling fuel prices contributing $33.5 million to the result.
Mr Joyce painted a rosy picture of airline prices at the profit announcement.
“Qantas Group domestic airfares are on average 20 per cent to 25 per cent lower than they were a decade ago in real terms,” he said.
“When you consider that the price of a Big Mac is up 114 per cent and house prices are up 400 per cent, this shows the true value that people are getting on the domestic market,” he said.
“But they are also getting it with international. Some Qantas International fares are more than 50 per cent cheaper than they were a decade ago and a massive 70 per cent of Jetstar’s passengers travel for less than $150,” he said
That’s all well and good, but in recent times domestic airfares have been rising while in the past 18 months oil prices have fallen 68 per cent from $US95 a barrel to $US31.87.
In that time, average economy class domestic airfares are up five per cent, according to figures produced by DIRD.
Even best-deal discount airfare averages are marginally higher than 18 months ago. And the discount fare index has only been lower than its current level in three of the past 12 months.
International fares have come down significantly on some routes, according to Flight Centre spokesman Hadyn Long.
Flight Centre research showed that in January bargain hunters could get tickets from Sydney to Bali 14.9 per cent cheaper than a year earlier, while tickets were down 40 per cent to Hawaii and flat on the Bangkok and Singapore runs.
The average advertised international flight out of Sydney was 14 per cent lower in January than a year earlier, Flight Centre said.
Steady as she goes to London
But such discounts are for the quick and international airfares are not down that much across the board.
“The Sydney to London fare is now around $1299 and its basically been the same for 30 years,” said Mr Long.
Mark Chaskiel, CEO of FBI Travel, said: “I don’t see ticket prices dropping as much as they should be. The airlines haven’t passed on fuel price cuts to anything like their full extent.”
Discounts are difficult to find for those who need to travel at short notice.
“If you have to travel between Melbourne and Sydney at short notice you’ll pay top dollar and be lucky if you can find a seat,” Mr Chaskiel said.
Airline profitability is being driven by three main things. Firstly the cut in oil prices is pumping cash to their bottom lines. Secondly, both Qantas and Virgin have cut costs and implemented redundancies.
And thirdly, the capacity battle they were fighting two years ago has been called off. That was when both were adding more seats than the market could bear and the result was lower ticket prices and losses for the airlines.
Now capacity is growing at or more slowly than the market and fares are rising.