Domestic Airlines Discount Airfares Fall to 17-year Low

Discount domestic airfares have hit their lowest level since 1992, according to a new survey that shows the cheapest fares are nearly 30 per cent lower than a year ago.

The 17-year low, revealed in figures for January from the Bureau of Infrastructure, Transport and Regional Economics, is further evidence that bargain-hunting travellers are benefiting from airline moves to offset weaker demand by filling planes.

Full economy airfares nose-dived, falling by 21.6 per cent compared with January last year, but this mainly reflects the impact on the index caused by the addition of Virgin Corporate Plus fares last February.

However, the sharp falls were not seen in all fare types.

Business class fares in January were less than 1 per cent lower than in the previous year, while restricted economy fares fell by only 2.6 per cent.

The BITRE Domestic Air Fare Index does not give actual fares but expresses them as an index. Although the bureau changed the way it collected data in 2003, the best discount index of 56.1 for January is almost half the figure recorded in January 1993, and shows how increased competition between airlines in the past decade has brought down fares.

Low-end domestic travellers are benefiting from moves to scrap fuel surcharges and from fare sales as carriers enter the traditionally quiet travel period from February to April.

While the fares are conditional, often do not include checked baggage and tend to be availablemainly in off-peak periods, they represent good value for people who can be flexible with their travel.

Examples include a Tiger Airways sale last week that offered thousands of seats across its network at half-price for travelbetween next month and October. The sale had one-way fares available from $17.49 plus a$5 credit card booking fee.

Virgin is advertising a 25 per cent discount on Sydney-Canberra flights that reduces the cheapest fare on the route from $79 — before the decision to axe the fuel surcharge — to $39.

Jetstar is promoting one-way fares from $39 (Brisbane-Newcastle) as well as several $49 and $59 specials for people who have only carry-on baggage.

Melbourne friends Kirsten Shelly, Debra McCarthy and Kate Burridge took advantage of the cheap fares to travel to Sydney and back this weekend.

Ms Shelly and Ms Burridge managed to buy their flights back to Melbourne on Virgin Blue’s website for $112.

For a peak Sunday flight it was a good price,” Ms Burridge said.

The deteriorating commercial conditions have prompted at least one financial analyst to downgrade his pre-tax profit forecast for Qantas to a figure below the airline’s guidance of $500million.

JPMorgan analyst Matt Crowe last week predicted a

pre-tax profit of $483million, with net profit falling from $970million last financial year to $348 million this year.

Mr Crowe said conditions had continued to deteriorate for airlines in the past month, and he was doubtful that fare cuts would have the stimulatory impact on demand that airlines hoped.

The domestic deals come as carriers are also cutting fares on international routes, with Etihad last week announcing return economy fares to Europe for less than $2000 for travel to June, as well as for dates in September and October.

The US route has become particularly competitive, with airlines offering return economy fares below $1200 for Travel between Sydney and the US west coast.

New entrants V Australia and Delta Air Lines will double the number of carriers flying non-stop to the US west coast.

V Australia, due to launch on February 27, triggered the fare-slashing contest on the US route by offering $1199 all-inclusive return fares.

Low-cost carriers Tiger Airways and AirAsiaX continue to provide low-cost international alternatives to the full-service carriers, with Tiger offering a $206.95 one-way Melbourne-Singapore fare and AirAsiaX a $199 one-way ticket to Kuala Lumpur from its Australian ports.