Business class airfares higher in August, figures show

written by australianaviation.com.au | August 16, 2016
Australia's domestic carriers at Sydney Airport. (Seth Jaworski)
Australia’s domestic carriers at Sydney Airport. (Seth Jaworski)

Domestic business class fares have risen in August, while the cheapest or best discount tickets have fallen slightly in the month, new figures show.

In a further indication the corporate and government travel sector is getting back to on the road after being on pause during the election campaign, the Bureau of Infrastructure, Transport and Regional Economics (BITRE) monthly report on domestic ticket prices showed the index measuring business class airfares was at 95.2 points in August, compared with 89.9 points a year earlier.

The business class index has risen for the past 12 months on a year-on-year basis and in June touched its highest level in more than four years.

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Similarly, the BITRE measure of air fares for restricted economy was also marginally higher at 79.5 points, up from 79.4 points in July 2015.

By contrast, the best discount economy index fell to 58.2 points, down from 61.9 points a year ago. The best discount index has fallen in nine of the past 10 months.

Australia’s two major airline groups Qantas and Virgin Australia have both made adjustments in the domestic market in recent times in response to soft demand, particularly among leisure travellers due to weak consumer confidence and the election.

Recent figures from Virgin showed the airline cut domestic capacity, measured by available seat kilometres (ASK) by two per cent in three months to June 30 2016 in an effort to improve yields. And while Virgin’s subsidiary Tigerair Australia grew capacity by double-digits in the quarter, the low-cost carrier is the smallest of Australia’s major domestic carriers when measured by ASKs.

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Virgin chief executive John Borghetti said recently the resources downturn and uncertainty around the economy had led to general weakness in consumer demand for air travel in recent times.

“The environment continues to be challenging and we are not seeing any changes to what we have experienced in the last six months or so,” Borghetti told reporters at the airline’s full year results presentation on August 5.

Virgin also reported it had reached its target of securing 30 per cent of its domestic revenue from the corporate and government travel sector in the final quarter of 2015/16.

Meanwhile, Qantas’s traffic statistics for May (the latest month for which publicly available data is available) showed the airline’s domestic ASKs fell 5.1 per cent in the month, compared with the prior corresponding period. Its low-cost unit Jetstar reduced ASKs 2.3 per cent in May.

Qantas planned to increase the use of smaller gauge Boeing 717 aircraft of domestic mainline routes as it redeploys 737s onto international routes as part of matching capacity with lower demand in some markets.

“The changes are made possible by reductions in domestic capacity, particularly in some regional resources markets, and efficient aircraft utilisation, which has freed up flying time within Qantas’s Boeing 737 fleet,” Qantas said in late July.

The BITRE air fare series was a price index of the lowest available fare in each fare class, weighted over selected routes.

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