Expensive tickets, limited seats and cancellations: what’s going on with airlines?

Most important points
  • The Australian Competition and Consumer Commission has found that domestic airline tickets have increased significantly.
  • Airlines are raising prices to relieve debts accumulated during the COVID-19 pandemic.
  • Experts say customers are unlikely to see lower airfares anytime soon.
After two years of border closures due to the coronavirus pandemic, many Australians eager to book overseas travel are facing high air fares and limited availability.
Experts and airlines have told SBS News that the situation is due to a number of converging factors, with consumers unlikely to experience relief any time soon.

So what’s behind the rising ticket prices, can anything be done about it and is this the new normal for air travel?

High demand and limited capacity lead to price increases

In September, the Australian Competition and Consumer Commission (ACCC) released its quarterly report on aviation competition in Australia, which showed that domestic air fares had risen significantly between April and August this year.

According to the ACCC, cheapest economy airfares in August 2022 were 56 percent higher than in April 2022, when they hit an 11-year low, while business airfares rose 17 percent between June and August.

David Beirman, adjunct fellow in tourism at the University of Technology Sydney and author of Tourism Crises and Destination Recovery, says the COVID-19 pandemic has helped push up prices on both domestic and international flights.
“For 50 years, actually between about 1970 and the onset of COVID-19 in 2020, airfares had been falling year over year, both in real dollars and in real dollars,” he said.
“COVID-19 has spoiled all of that…because of the incredible restrictions on airline operations, airlines basically lost money hand over hand…so they built up a huge amount of debt, and most of them have to pay it back.”
Mr Beirman says many airlines are now raising prices as part of an effort to relieve debt, while at the same time facing staff shortages due to pandemic layoffs, adding to problems such as frequent cancellations and limited flight options.

“The airlines have had a lot of problems,” he said.

“The other thing to note is factors like increased fuel prices, trying to pay off losses, paying for new hires … a bunch of different factors that really played a role in airfares going up.”
Monash University aviation expert Professor Greg Bamber agrees that a post-pandemic increase in demand coupled with a lack of staff creates a perfect storm when it comes to rising ticket prices.
“There’s a big demand; people haven’t been able to travel to catch up with their friends and family or corporate clients or suppliers for almost three years now and there’s a big pent-up demand,” he said.
“So people trying to travel, but there’s reduced capacity… the airlines have reduced the number of flights, so there’s a high demand for fewer seats, and the airlines have raised prices.”

“Airlines prioritize profit over people.”

Worst on-time performance ever recorded, says ACCC

In recent months, customers have also complained about repeated cancellations.

In July 2022, the domestic airline industry reported its worst ever on-time performance, according to the ACCC, with airlines canceling flights at a rate more than three times the long-term average.

When it comes to cancellations, Professor Bamber says airlines should do better.
“A giant airline like Qantas can cancel flights in the blink of an eye, which causes us a lot of inconvenience, and we are expected to gobble it up and get no compensation,” he said.
“And yet, if the customer wants to change his flight for possibly a good reason, Qantas will charge hefty fines, even if the rebooking costs him little.”
Professor Bamber says airlines should focus on rebuilding their workforce after cutting numbers during the pandemic.
He says treating employees well is an essential factor in providing better customer experiences.

“(Airlines) need to build in a bigger buffer and realize that there are still a lot of illnesses and sometimes staff will be absent, so they need to have reserves ready,” he said.

“It is in the interest of customers and the airline that staff are treated well, but at the moment many parts of the staff feel they are not being treated well.”

What have the airlines said?

A Virgin Australia spokesperson told SBS News that the airline is focused on providing value and choice to customers in the current environment of increasing demand, inflationary pressures and high fuel costs.
“We have seen tremendous demand as Australians take to the skies to reconnect with friends and family and enjoy the travel experiences we have all missed during the pandemic,” the spokesperson said.
“Virgin Australia continues to ramp up our domestic services and we expect capacity to return to around 100 per cent of pre-COVID levels in December and January.”
The spokesperson said Virgin Australia is also ramping up its international short-haul services.
On Oct. 13, Qantas said in an operational performance update that cancellations fell from 4 percent in August to 2.4 percent in September.
The airline said mishandled baggage remained low at 6 per 1,000 passengers in September and October.
On November 23, Qantas said that while fuel costs remain high, operational performance is improving.

According to the market update, a $200 million investment in personnel and aircraft would maintain these performance levels during current and future waves of COVID infections.

Is there any relief on the horizon?

Despite airline optimism, Mr Beirman says customers are unlikely to see lower air fares anytime soon.
“To some extent, I think we’re going to have a plateau of higher levels and higher margins… a little bit compared to what they were in 2019.

“But there’s definitely a slightly higher version of the new normal and it’s not just because of debt… prices.”

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