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Price war sends economy fares to six-year low

written by Adam Thorn | May 4, 2021
A Jetstar A321-231, VH-VWY, as shot in Melbourne YMML by Victor Pody

The aggressive price war between airlines rebuilding their networks has led domestic economy fares to hit a six-and-a-half-year low, Australian Aviation can reveal.

New Bureau of Infrastructure and Transport Research Economics (BITRE) statistics reveal how the monthly price index hit 76.2 in April – its lowest since November 2014.

The news comes days after Virgin Australia raced to match Rex’s $39 Sydney–Melbourne deal and after Qantas publicly admitted it would now focus on “cash-positive flying” rather than restoring old profit margins

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Meanwhile, in recent weeks, Virgin has pledged to hire 150 new cabin crew and lease 10 new 737s to increase capacity, while Qantas and Jetstar now plan to fly more aircraft than before the pandemic.

The BITRE data is derived from a monthly survey of airline internet booking sites. The series is a price index of the lowest available fare in each fare class, weighted over selected routes. It does not measure real airline yields, or average fares paid by passengers.

Aside from low economy fares, it showed business class fares were at their lowest levels since February 2013, too.

The competition to provide cheap tickets between Sydney and Melbourne hit a historic low only yesterday when Rex and Virgin sold ‘full service’ tickets for just $39.

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Rex made the initial announcement at 5am and bullishly predicted there would be “copycat moves” from its larger rivals.

Then, at 11:30am, Virgin rose to the challenge to exactly mimic the deal, which both carriers claim is a first for a non-budget airline.

Rex deputy chairman John Sharp said on Monday morning that his initiative would “singlehandedly revive a moribund travel and hospitality industry in the two cities”.

“This is why Rex is good for Australia and why Australia needs Rex. For the first time ever Australians can have premium reliable domestic air services at honest prices delivered with our trademark country hospitality,” he said.

Rex’s launch price for the route was $79 in December. 

On Tuesday, Sharp revealed sales went “wild”, while Virgin said it saw the second biggest day of sales in its history.

Airlines are using cheap prices in conjunction with expanding their fleets and staffing levels as they battle to regain their pre-pandemic market shares.

Qantas chief executive Alan Joyce has repeatedly claimed his airline group would increase its slice of the domestic industry from 60 to 70 per cent.

“The Australian government’s half-price fares program is having a direct and indirect impact on the sector,” said Joyce previously, referring to the government’s cheap ticket initiative to get people flying. “The direct response to the program has been fantastic, with over 250,000 fares sold in the first two weeks.”

The flag carrier is able to fly more aircraft within Australia because Jetstar will deploy six Airbus A320s on loan from Jetstar Japan.

The business also plans to shift five of its 787-8s, usually flown on international routes, to the domestic market from mid-year. These 335-seaters will initially be flown between Melbourne/Sydney-Gold Coast and Melbourne/Sydney-Cairns.

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