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The Guardian - AU
The Guardian - AU
National
Elias Visontay Transport and urban affairs reporter

Air fares likely to stay stubbornly high as travel-hungry Australians’ tastes change

A Qantas flight takes off from Sydney airport
International air fares have steadily decreased from record highs seen last year but are expected to remain fairly high in to 2024. Photograph: Jason Reed/Reuters

International air fares are set to remain stubbornly high throughout the first half of next year, but the preferences of travel-hungry Australians are shifting.

After the broad reopening of borders by mid-2022, international airlines have largely enjoyed bumper profits by operating fewer flights than an average pre-pandemic year, all while Australians’ pent-up demand for travel meant they were able to charge eye-watering amounts for tickets.

Since then, international air fares have steadily decreased from record highs seen during the previous year.

Average return economy air fares from Sydney to London currently cost about $3,000 for most of 2024, but rise to $3,500 and above during periods of peak holiday travel, according to flight aggregator site Skyscanner’s savings generator tool.

Fuel prices and inflation are in part driving higher operating costs at Qantas, the airline’s chair, Richard Goyder, told the company’s annual general meeting on Friday. He said the airline had been absorbing most of the increased costs.

“However, with sustained high fuel prices and a weaker Australian dollar, last month we increased fares by an average of 3.5% to recover some of this higher cost,” Goyder said. The long-term forecast for crude oil is US$85-$95 a barrel for the next 12 months, though the elevated margins enjoyed by refineries during the conversion to jet fuel have come down recently.

The outlook for international air fares

Simon Elsegood, the head of research at the Centre for Aviation, said it was difficult to predict exactly how high international air fares would remain throughout 2024 but that the elevated price of fuel would affect what consumers pay. “That’s going to keep costs fairly high.”

He said the international market was operating at about 95% of pre-Covid capacity, with some airlines unable to run more flights while others deliberately fly fewer but pack out those planes.

Travel industry operators have also criticised the Albanese government’s decision to block Qatar Airways from almost doubling its capacity into Australia, which some analysts claim would have chipped away at average air fares.

Elsegood said airlines were on track to reach 100% of pre-pandemic levels during the second quarter of 2024, according to forward schedules. But the plans were not entirely reliable as “airlines will tend to change their strategy quite rapidly” based on demand.

“You can shift aircraft to where demand is fairly rapidly. Typically what we’ll see now is a fairly substantial build up in capacity and prices as we gear up towards Christmas, and whether it’s a European destination or just getting away from the heat, the leisure market is still pretty hot,” Elsegood said.

“Australians are still looking to spend money”, but elements of the pre-pandemic market were returning. “We are seeing the typical seasonality patterns coming back as traffic does, the normal swings and roundabouts of fares.

“It’s more about the level of capacity that airlines choose to run in shoulder (non-peak) seasons. If they keep capacity up you’ll often see very good prices (at these times),” Elsegood said.

Australian wages are also keeping air fares higher. Due to the high average income and cost of living, airlines can charge Australians more for the same seat than customers in other countries.

Australians’ travel tastes are changing

But higher fares mean travel appetites are shifting. While the phenomenon of “revenge travel” – taking trips that were not possible during Covid – is slowly unwinding, Elsegood said people were willing to “travel less frequently but willing to spend a bit more money on bigger, longer trips”.

“They’re wanting to reward themselves with things they wouldn’t have ordinarily done before the pandemic,” Elsegood said. Travel in premium economy, business and first class by leisure passengers is above pre-pandemic levels.

This is backed up by a Skyscanner survey of about 2,000 Australians which found 75% were planning to travel either as much as they did in 2023 or even more.

At the same time, 35% of respondents have budgeted to spend more on travel in 2024 while 33% have budgeted to spend the same, indicating a willingness to spend at the prices airlines are charging.

However, European holidays appear less of a priority. The survey found Japanese cities including Tokyo and Osaka have seen the largest increase in interest among Australian searchers, as have destinations elsewhere in Asia and the Pacific.

Jarrod Kris, the principal commercial manager at Skyscanner, echoed Elsegood’s observation that revenge travel had dissipated, and turned into a desire to spend on specific cultural experiences.

He said there had been an emerging trend of people flying overseas for concert tickets they may have missed out on locally, notably among Taylor Swift fans flying between continents.

“People are valuing things that are more meaningful to them, and especially with what we call ‘gig-tripping’, they see the travel as more important than costs to them.”

Additional reporting by Jonathan Barrett.

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