QANTAS Airways, not known for usually offering big discounts, has cut prices more than six times this year. Virgin Australia is averaging at least one fare sale a month. Even Ryanair Holdings, which practically invented affordable European air travel, said flights are getting cheaper.
Passengers around the world are winning some respite from the fare madness that followed the pandemic – and further price declines are coming.
It’s a partial re-balancing of power from the post-Covid demand surge that gave airlines almost free rein over fares. As travel restrictions lifted and the world rushed to reconnect, prices ballooned for the reduced number of seats that were available. Premium fares reached more than US$20,000.
Now, falling fares reflect the growing number of international flights on offer, particularly in Asia and Europe, and a travelling public that is increasingly cost conscious.
“It’s not just a blip, it’s a global trend,” said James Kavanagh, chief executive officer of leisure at Brisbane-based travel agency Flight Centre Travel Group. “Airlines certainly don’t have all the power at the moment.”
International fares globally fell 6 per cent in the first six months of 2024 from the year-ago period, Flight Centre said on Wednesday (Jul 24). Flights out of Australia were 13 per cent cheaper, while fares to Indonesia – home to Bali, one of Australia’s favourite getaways – slumped 18 per cent, Flight Centre said.
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Prices will continue to fall as the cost-of-living crisis makes consumers more price-sensitive, Kavanagh said. With under-pressure airlines seeking to fill planes months before departure, there are deals for early bookers, he said, citing 10-day tours to China, including flights and accommodation, on offer for A$999 (S$882).
Greater Bay Airlines, which flies between Hong Kong and a handful of destinations around Asia, this week offered hundreds of return flights for just HK$20 (S$3.44) each. Qantas, where fares usually align with its full-service brand, on Tuesday cut the price of more than one million seats on domestic flights to as little as A$109. The snap offer was the airline’s sixth local sale of the year.
To be sure, the trend isn’t uniform. Qatar Airways CEO Badr Mohammed Al-Meer, for example, said that passenger demand was accelerating for the Gulf airline.
At the same time, a shortage of commercial aircraft and ruptures to aviation’s supply chain are constraining capacity. Wait times for the most popular aircraft from Boeing and Airbus are years long. Airbus CEO Guillaume Faury said at the Farnborough Air Show on Tuesday that the manufacturer is turning down some orders because of its huge backlog. To some degree, these factors limit how far ticket prices can fall.
All the same, declining fares are troubling some airline bosses and unsettling investors. The Bloomberg World Airlines Index, which includes American Airlines Group, Air China and Deutsche Lufthansa, is down around 15 per cent in the past 12 months.
Emirates president Tim Clark lashed out at the way some airlines have suddenly cut fares, warning it risked triggering “a race to the bottom”.
“It only takes one of the big players to do it and everyone goes the same way,” Clark said. “They need to hold their nerve. The characteristics of the segments that drive our business have altered, so align your price points to that and it’s a growing story, not a shrinking story.”
“As far as I’m concerned, as long as the A380 to Heathrow is full six times a day and I can get the kind of yield I’m getting, I’m not going to change,” he said.
Ryanair this week cut its outlook for ticket prices in the crucial summer travel period and said fares will be “materially lower”. Consumers have become “just a little bit more frugal”, the airline’s chief financial officer, Neil Sorahan, said. Shares in Ryanair are down about 26 per cent this year. BLOOMBERG
