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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.”
deano
says:Is it time for a third player in the Australian domestic scene ?
Since Tiger was absorbed into Virgin a lot of the super cheap deals have disappeared
There seems to be an element of collusion with both QF and VA reducing capacity to keep fares higher
There also seems to be only slight price differences between QF and JQ on shared routes, unless you are booking 3 months in advance
Similar sectors in Europe operated by the likes of Easyjet and Ryanair are drastically lower than those offered by Jetstar
That said, with such a subdued market, how is it that VA is still in the red ?
Our LCCs simply are not delivering the LOW COST that LCCs in Europe, Asia and the US seem to be capable of delivering
GBRGB
says:Deano I agree, domestic travelers are once again at the mercy of a cosy duopoly who each own the 3rd and fourth players anyway, so we are stuck in a spiral of airlines reducing capacity to ensure load factors which allow them to keep prices high, so people stop flying and they reduce capacity further, it’s just a continuous spiral and the traveling public are the ones who pay in the long run, the govt needs to open up th skies to more airlines, particularly in regional areas, if they are foreign then so be it, we have seen what has happened in the retail and telco sector with real competition, time for airlines to do the same.