Update on how airfares are tracking at present and then a bit of the old crystal ball!

Business-class airfares exceeding $20,000 for international flights have arrived and are set to become the “new normal”, according to an article in the Weekend Australian. The paper attributed the big fares to “enormous demand, limited capacity and record fuel prices” – with at least one expert forecasting that although the addition of more capacity might soften fare levels, this was likely to be counteracted by soaring jet fuel prices. Airlines routinely hedge their fuel purchases but hedging cannot insulate them from the market indefinitely.

An OTA booking site last week had return flights to Rome selling for as much as $21,000 in July, while a business-class return flight to Los Angeles was $23,000, the Australian reported. With a longer lead-time, however, the picture appears to be rather different. A check within an airline reservation system like ours, for a round-trip flight Sydney-London in September shows business class fares of $7800 rising to over $9000. There are plenty of economy fares for under $2200, which seems not far out of line with pre-Covid pricing. The main pressure seems to be on business class. If we look again at the next couple of months we have issued tickets for several clients travelling to Northern Europe. Examples are; business class, $11,400 and $9,900 and economy $3,800. We have seen fares for $17,000 plus as well! A large component of any airfare, at present, is the very large fuel surcharge levy. Current indications show business-class fares to Europe are 40% higher than 2019 levels and economy fares are up 34%.

Extra capacity is sorely needed. Latest federal government data shows that seats made available on international scheduled airline services to/from Australia during the month of March 2022 totalled 1.193 million – which is 73.4% less than three years earlier, in March 2019. In other words, for every three seats that were for sale on international flights three years ago, just one seat is available now. The situation may have improved a little since March but capacity is still lacking.

Capacity is a combination of reduced numbers of airlines servicing Australia and New Zealand and within those that are reduced timetable schedules. There is that old phrase – supply and demand! Flight Centre Australia general manager Brent Novak told the Australian that people were determined to travel after two years at home (the so-called “revenge travel” phenomenon). There was no point waiting for fares to fall, Novak said, as fares could just as easily move the other way. Book a flexible fare early is Novak’s advice.

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