Airfares to Phuket fall to record lows
A fare war between airlines on international routes has led to Australian travellers paying just over $1000 for flights on the so-called kangaroo route to London.
The record low fares to the United Kingdom and other top overseas destinations for Australians are the result of airlines boosting capacity on international routes more than 9 per cent over the past year, outpacing the level of demand from travellers.
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In turn, an increase in the number of empty seats on planes has forced airlines to lower fares in the hope of stimulating demand.
The largest fall in prices over the past year has been to popular destinations such as London, Los Angeles, Phuket and New York.
The cheapest tickets for return flights to London have slumped 23 per cent over the past year to $1043, while for Los Angeles and New York they are down more than 11 per cent to $939 and $1199 respectively. The prices are based on return fares sold in early September.
Fares for flights to the Thai tourist destination of Phuket have more than halved to $373, the figures from Australia’s largest travel company. Flight Centre, show.
While budget airlines remain competitive, a number of the super-low fares are for flights on full-service airlines such as Etihad. The cornerstone shareholder in Virgin Australia recently replaced Thai Airways in the top-10 airlines in terms of market share on routes to Australia.
In a sign of how much fares have fallen, an average week’s wage in Australia can now pay for the cost of a return economy flight to London. Seven decades ago, it would have cost about $131,000 in today’s dollars, or about two years’ salary, according to Flight Centre.
Flight Centre spokesman Haydn Long said airlines were chasing market share on international routes, which had resulted in record low fares to destinations such as London and New York.
“In short, there are more seats, but there are also more empty seats. This creates pricing pressure,” he said.
In Australia, average international airfare prices fell 4 per cent in the six months to June. Flight Centre has dubbed it a “golden era for travel”, a year after predicting that fares could not drop any further.
The return of Qantas’ alliance partner, American Airlines, to routes between the US and Australia in late 2015 after a long absence has piled pressure on incumbents Virgin, Delta Air Lines, Hawaiian Airlines and United.
The latest government statistics show the total number of seats on international flights to and from Australia surged by more than 9 per cent in the year to June. Airlines filled 76.5 per cent of the seats in the market in June, down from 77.4 per cent a year earlier.
Low fuel prices have acted as a buffer for airlines’ profitability from the steep discounting of fares on international routes.
However, it has been a different story for travel companies such as Flight Centre, whose commissioned-based earnings from selling flights have been curtailed.
And while travellers flying abroad are benefiting from record low fares, discounting in the domestic market has been more subdued.
The truce between Qantas and Virgin has held since it was declared in 2014, following several years of intense competition that dented the earnings of both airlines.
Deutsche Bank analysts told investors that the “the domestic market appears to be in balance competitively”, although demand had been weaker in July and August.
