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Exclusive: Domestic airfares rise as fuel prices surge

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Exclusive: Domestic airfares rise as fuel prices surge
Virgin Australia line up at Melbourne’s Tullamarine airport (Victor Pody)

Domestic airfares appear to be rapidly rising as airlines contend with increasing jet fuel costs and inflation.

New BITRE data from the Department of Transport shows the monthly index price for June is tracking to be 2.6 points higher than May, following a long period where Australia has seen some of the lowest fares in its history.

However, the rise to 72.8 still means standard economy prices are significantly cheaper than pre-pandemic prices, when the index stood at 100. Nevertheless, it still marks the most significant rise in months.

It comes figures compiled by IATA show global jet fuel prices have increased 6 per cent in the last month and nearly 130 per cent since one year ago. Across Asia and Oceania, prices have increased 20 per cent in the last year — a far higher rise than any other region of the world.

In March, Australian Aviation reported how Qantas chief executive Alan Joyce predicted fares would initially increase by 7 per cent with steeper hikes likely to follow.

Speaking at the Australian Financial Review Business Summit, Joyce revealed that the airline hedged around 90 per cent of the fuel it needed through to the end of June, and 50 per cent of its requirements for the September quarter.

“[Hedging] gives us time to react to that higher fuel price,” he said. “Unfortunately, if we stay at these levels, airfares are going to have to go up, we’re going to have to pass them on.

“It’s not massive, but it will have an impact on some levels of travel out there. If it moves further, for every US$4 on the barrel, it’s another per cent that airfares have to improve by.”

Flight Centre managing director Graham Turner also warned that passengers could face a 10-15 per cent jump in prices.

“My guess is with airline cap­acity increasing, we should get back to pre-COVID international airfares over the next six months, but the cost of fuel could put 10-15 per cent on an airfare,” he told The Australian.

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Turner said that increasing fares are unlikely to deter international travellers but that rising tensions in Europe may act as a deterrent.

“If it settles down, travel will go up, but if it gets worse, people will be more reluctant to travel. If the situation remains the same, people will get used to it and will still travel,” he said.

“Most of us have become fairly resilient now in terms of our business,” Turner said of the airline and travel industry.

Despite likely increases, Australia’s domestic aviation market has rebounded strongly since the pandemic, with the number of people travelling in April reaching 89 per cent of pre-COVID numbers.

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  • Source: https://australianaviation.com.au/2022/06/exclusive-domestic-airfares-rise-as-fuel-prices-surge/

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