Opinion: What airlines aren’t telling you about high fares

But there is another reason airlines are less keen to say aloud — they’re hiking up the price because people are paying it. It’s the most fundamental law of supply and demand. I haven’t been home to the UK in three years due to the border closing, and I felt I couldn’t leave it any longer. If I didn’t return in January, then when? In August, leaving it at three and a half years? December, leaving it for four years? If I hadn’t gone back, I risked not having any friends left back home. I had to go.

But I have also found myself temporarily in a strong financial position, having saved thousands of dollars during COVID-19. The flights cost me a fortune, but I was in a position to grin and bear it. And this is also the case for millions of travellers worldwide who have similar stories to me. The latest figures released by the Australian Bureau of Statistics show just 18 per cent of those arriving in Australia were tourists, compared with 56 per cent visiting relatives.

Perhaps most damningly of the industry’s narrative is the record profits. Virgin has hit real profitability for the first time since its damaging ‘capacity wars’ battle with Qantas. At the time of going to print, the national carrier is targeting an underlying profit before tax of up to $1.45 billion for the first half of the current financial year, while even Rex’s capital city flights are now generating millions per month. Or in other words, if they wanted to, airlines could cut prices and still make a generous return. However, they see this as a golden opportunity to recoup some of the losses accumulated during COVID-19.

The Australian Competition and Consumer Commission (ACCC) hinted at the end of last year it had reached the same conclusion, effectively stating that while external factors had pushed up prices, it would expect airlines to bring them down in the new year. “The ACCC will be monitoring the domestic airlines closely to ensure they return capacity to the market in a timely manner to bring downward pressure on airfares,” it said in its latest quarterly report on aviation. “In this context, the ACCC would be concerned if the airlines withheld capacity in order to keep airfares high.” It also revealed that it believed airlines weren’t releasing sales tickets because demand was too strong to warrant it.

Other than consumers, the other big casualty of this post-pandemic grab for our wallets is airports. Fewer flights equal fewer passengers travelling through their terminals, but no ability for them to increase fares to compensate. Sydney Airport in December actually recorded fewer domestic passengers passing through than in five other months that year. In particular, a lack of international flights has a knock-on effect on all domestic travel, with many interstate services booked by tourists travelling around the country. Sydney Airport’s chief executive, Geoff Culbert, said there were 411,000 fewer domestic passengers in December 2022 than in December 2019. “Australia needs to unlock more capacity, and quickly, if we want to see a sustained recovery for our tourism, education, and export industries,” he warned.

But if supply and demand is what’s stifling our recovery, it will be precisely this that will return prices to normal. Bonza surprised many industry watchers by keeping its promise to launch at less than $50, while larger international airlines are slowly returning to Australia. The opening of China’s borders signals, globally, that the pandemic is over, at least from a travel point of view. With more flights and seats for sale, the pendulum will swing back in favour of travellers, and fares will have to lower to entice consumers.

But while consumers will soon be flying for normal prices, it will only happen after airlines have recorded the best year in their histories.