Australian domestic airfares for business class and the most restrictive economy tickets fell in August, new figures show.
The Bureau of Infrastructure, Transport and Regional Economics (BITRE) measure of domestic business class airfares was at 92.7 index points in August, down from 94.4 points a year earlier.
Meanwhile, the best discount economy index was also lower than a year ago at 54.7 points, compared with 57.5 points in the prior corresponding period.
By contrast, the restricted economy index rose to 83.5 points, from 79.1 points in August 2016. It is at the highest level since a change to the index in June 2011 when Virgin Australia and Jetstar introduced simplified fare structures that brought down the cost of so-called flexible tickets.
The BITRE air fare series is a price index of the lowest available fare in each fare class, weighted over selected routes.
Virgin Australia chief executive John Borghetti said on August 10 there had been a lift in business confidence in recent months.
“That kind of translates a little bit into what we’ve seen over the last quarter or so where business travel seems to have picked up more than leisure travel and that of course always translates to better yields,” Borghetti told reporters during Virgin’s 2016/17 full year results conference call.
“We’re expecting that to continue in this quarter.”
Borghetti said the impact of this pickup was being felt across the network.
“Obviously the triangle always stands out first but we are starting to see it on some other routes as well,” Borghetti said.
Qantas releases its full year results on Friday. The airline group has guided the market to an underlying profit before tax (PBT) result for the 12 months to June 30 2017 of $1.35 to $1.40 billion, a decline of between 8.5 per cent and 11 per cent from the prior year.
Figures from an International Air Transport Association (IATA) report showed the Australian domestic market continued be flat, with airlines cutting capacity in an effort to better match demand with the number of seats in the market.
Local carriers experienced a 0.3 per cent improvement in demand, measured by revenue passenger kilometres (RPK) in the first half, while capacity, or available seat kilometres (ASK) fell 2.3 per cent and load factors rose two percentage points to 77.6 per cent.
IATA said domestic ASKs in Australia had fallen at an annualised rate of about three per cent since the start of 2017.
“Australia’s RPKs have ground to a standstill,” the IATA report said.
“The domestic Australia market barely grew in H1 2017.”