No ‘fare war’ yet as prices keep rising

Domestic airfares rose by 5 per cent in the second quarter. (John Absolon)

Increasing competition between Qantas and Virgin Australia has yet to pay a dividend for passengers as domestic airfares in Australia rose by five per cent over the three months ending in June.

That was well above a three per cent rise across the Asia-Pacific region and roughly one per cent increases in the Americas and Europe, the Middle East and Africa.

“Sustained demand has kept domestic airfares on a growth trajectory for the Australian market,” said Carl Jones, head of American Express Advisory Services for the Asia Pacific, which tracks airfares. Jones said demand was particularly strong from the resources sector.

“We haven’t yet seen the impact that increased capacity from local carriers has had on domestic airfares and it will be interesting to see how domestic fares perform in the last two quarters of the year,” Jones added, referring to speculation that Qantas and Virgin are headed for a fare war.

Fares also rose strongly in India, while intra-Asia fares fell by 2 per cent from the second quarter last year due to increasing competition from low-cost carriers.