A combination of low fuel prices and increased competition leads to record-low airfares.
Airlines have responded to the low cost of fuel, increased competition and a weaker Aussie dollar by offering some of the lowest priced airfares on record – and they could go even lower.
As little as five years ago, who would have dreamed that you could fly from Melbourne to Sydney for as little as $35 one way or from Perth to Bangkok for $226 return?
“We’ve seen airlines respond to market conditions like increased competition and reduced fuel prices with amazing airfares not seen before,” Flight Centre’s Tom Walley told news.com.au. “Even looking back just 12 months, an airfare to South America for under $1300 return was unheard of, now that’s the type of price you can expect to pay.”
The competition between low-cost airlines such as Scoot, Tigerair, AirAsiaX and Jetstar have not only helped to drive market prices down, but have also increased pressure on premium airlines to lower their prices.
“This is particularly true on key routes to the US, including LA, South America and much of Europe, as well as domestic fares,” said Mr Walley. “In South America, for example, Air New Zealand entered the market with flights to Buenos Aires within the last six months, introducing competitive prices that’s helped reduce airfares to the region as a whole.”
In 2015, worldwide airfares fell by 4.5 per cent and are expected to drop even further.
According to the International Air Transport Association (IATA): “Competitive pressures within the industry mean that the declines in oil prices seen around the end of last year and into 2016 are likely to translate into further declines in fares.”
“Airfares are expected to decline (in 2016) due to ongoing competition from low-cost airlines which will likely boost passenger numbers but weaken price increases slowing industry revenue growth,” added IBISWorld’s Senior Aviation Industry Analyst, Tristan Williams.
Australians may once have shied away from low-cost airlines, for fear they’d ‘get what they paid for’. But those days are over, as more Aussies embrace budget carriers.
By the end of 2015, airlines such AirAsia, Jetstar and Scoot now account for almost 20 per cent of the total outbound travel market.
“It’s a very exciting time for the industry, when pricing has never been better the quality of travel products is extremely high and more people can get out and explore the world,” said Mr Walley.
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