Christmas air fare shock

by Steve Creedy - editor
December 15, 2016

Travellers making a last-minute decision to head home for Christmas will be harder hit this year after a whopping 36 per cent increase on last year’s best discount fares, newly released statistics reveal.

The December domestic airfares index compiled by the Bureau of Infrastructure,  Transport and Regional Economics shows airfares in Australia have risen across all classes during the year. Business class fares are 6.5 per cent higher than 12 months ago, while the smallest increase — 3.3 per cent — is in the restricted economy category.

The 36 per cent increase in best discount fares puts the index at its highest level since 2007.

Airfares traditionally rise over the Christmas period as a big increase in demand allows airlines to effectively boost average prices by changing the mix of seats in each fare category.  Any cheaper seats are also quickly snapped ahead of time, forcing people who book late to pay higher fares.

In addition, Australian carriers have been keeping strict controls on capacity growth after the heady surge caused by the so-called capacity wars that drove prices down to unrealistically low levels. 

Virgin, for example,  reported that capacity was down 0.5 per cent and sectors flown fell 2.3 per cent for quarter ending September 30 compared to the same period last year.

A spokesman for the bureau said that the Christmas spike in fares had been lower in the previous two to three years and it was now back the kind of levels previously seen.

“When we were analysing it, my feeling was it’s more about the previous couple of years than it was about this year,’’ the spokesman said, noting that the day of travel also had an impact.

The bureau’s index is constructed from a monthly survey of airline and internet booking sites for travel on Australia’s top 70 routes on the last Thursday of each month.

It is a price index of the lowest available fare in each class, weighted over selected route and including taxes and charges,  rather than a measure of average fares actually paid by passengers.

However, it gives an indication of fare movements and how they compare to a baseline set in July, 2003.

The figures in all three categories are still below the 2003 levels.