The capacity war between Qantas and Virgin Australia is over – and for consumers, that means the end of big discounts on fares.
Australians have benefited from a fall in domestic flight prices in recent years, as the airline rivals battled for the sought-after business and tourism travel dollar; Qantas flights alone have fallen by 21.6 per cent over the past decade.
But this week, Qantas CEO Alan Joyce signalled the end to super cheap flights, warning travellers that airfares will rise.
It is very clear that the capacity situation in the domestic market has hit everybody’s profitability
While demand has been growing by four to five per cent on an annual basis in recent years, capacity has grown by about eight per cent over the same period. This means the “yield” (or profit) has fallen.
In response, Virgin moved to cut capacity in February, March and April. Qantas has now followed suit, announcing last month that it would freeze domestic capacity for the first three months of the 2014-15 financial year. The national carrier had initially targeted a 65 per cent share of the national market, but has since flagged that it is happy with 63 per cent.
• For tips on getting cheap seats, see the bottom of this story
“It is very clear that the capacity situation in the domestic market has hit everybody’s profitability,” Mr Joyce said this week at the International Air Transport Association annual meeting in Doha, Qatar.
Justin Wastnage, aviation policy director at the Tourism and Transport Forum, says that prices will not return to the levels of past decades, but are likely to stabilise.
“What we’ll probably see is prices closer to the average fare rather than daily sales, which are aimed to fill unused seats – and, with the reduction in capacity in the market, what we’ll tend to get is more consistent fares, so if they are $99 they are more likely to be $99 whenever you look,” he said.
“The amount of discounting we’ve seen in the market, you’d expect that to slow down,” he says. By comparison, the “restricted” economy fare, where charges apply for date changes, is on the rise. The dramatic drop in 2011 was due to changes by Virgin, Jetstar and Qantas to simply their fee structures.
Despite this, Mr Wastnage says that there are still factors such as better fuel efficiency, falling fuel costs and competition between the major capital cities that are driving down airfares. There is also improved air traffic management, including policies such as holding aeroplanes on the ground at peak travel times, reducing the amount of time that flights need to circle in the air waiting to land.
“This may sound trivial, but it saves airlines a lot of money [in fuel consumption],” he says.
The overall trend in Australia is an increase in overseas travel. Figures released yesterday by the Australian Bureau of Statistics showed a 5.1 per cent increase in overseas departures compared with the same time last year – thanks, in part, to the ongoing strength of the local currency.
Mr Wastnage says that cheaper international flights, particularly to Asia, had “definitely” added to an ongoing trend towards international over domestic travel.
Don’t book late: Business flights and last-minute bookings still attract a premium. So, where possible, book ahead.
Don’t (always) book early: While booking in advance is better than booking late, a really early booking might mean you miss a sale.
Subscribe: The best way to get the cheapest deal is to subscribe to carriers’ mailing lists and be ready to jump online and book the sale price immediately. These deeply discounted fares won’t last long, so timeliness and flexibility in travel times is the key.
Peak periods: Airfares are always going to be higher in peak times. For example, flights to Cairns are likely to be more expensive during the colder months. Mr Wastnage says that these flights are generally higher than necessary, in order to make up the shortfall of the low season when there is less demand.
Keep on clicking: The way to get the cheapest fare is to keep on looking. If airlines sell a lot of seats, they’ll start raising prices. If they aren’t selling, they’ll go on sale. As a consumer, there’s no sure-fire way to tell – so if you see a good deal, snap it up.
Travel agents: You’d think the internet would have it covered, but Mr Wastnage says walk-in travel agents can be cheaper in some instances. This is because they tend to buy in bulk and promise to sell, so often they get cheaper flights than those available online.
Compare: Use comparison sites, look at the airlines’ own websites and trawl the internet for the cheapest deal, but be wary of hidden fees and charges.