Cheap domestic airfares in Australia look set to return to being at their most expensive in nearly 15 years despite prices going down slightly last month.
According to new BITRE data released by the Department of Transport, the ‘best discount’ airfare index is at 98.3 for November – despite being at just 48 in April. While an improvement on the 106 recorded in September, the numbers appear to be rapidly trending upwards.
Regular airfares are also at 83, its highest since March 2021, and significantly up on the 70 recorded in just May this year.
It comes despite jet fuel prices in the APAC region going down by 6.5 per cent week on week, and prices globally stabilising following Russia’s invasion of Ukraine.
This week, Australian Aviation reported how both Rex and Qantas surprisingly increased profit forecasts, with the latter claiming limits on international capacity were driving consumers to holiday in Australia.
The Flying Kangaroo is now targeting a remarkable underlying profit of up to $1.45 billion – an increase of an extra $150 million on numbers reported just weeks earlier.
The result comes despite the wider group recording an underlying loss before tax of $1.86 billion in its last full-year results and claiming the pandemic cost its airlines $7 billion in total.
In a surprise statement, Qantas said on Wednesday that limits on international capacity were driving consumers to instead holiday in Australia.
“The group’s net debt is now expected to fall to an estimated $2.3 billion and $2.5 billion by 31 December 2022,” said the business in a statement.
“This is around $900 million better than expected in the most recent update, due largely to the acceleration of revenue inflows as customers book flights on Qantas, Jetstar and partner airlines into the second half and beyond, as well as deferral of approximately $200 million of capital expenditure to the second half.
“Around 60 per cent of the $2 billion in COVID-related travel credits held by the Group have now been redeemed by customers.
“Total credit usage is consistent at a rate of circa $70 million a month, and new initiatives will be announced shortly to encourage full use of remaining credits over the next year.”
The airline added that low levels of net debt mean it is in a position to “consider future shareholder returns in February 2023”.
Rex, meanwhile, on Friday said its capital city 737 flights generated a $2 million profit in October – up significantly from recording “slight profitability” the month prior.
In a statement released to the ASX, Rex said its unaudited management accounts for October show a profit before tax for the domestic jet operations of “about $2 million”.
It added its regional Saab operations are still loss-making for October due to the “predatory actions of Qantas”, but its EBITDAR (earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs) was a positive $1 million for the month.
The airline believes its smaller aircraft will return to profitability by Q3 of FY 2023.
BITRE’s domestic airfare index monitors changes over time in the price of Australian air travel. The current system began in October 1992 and is presented as a price index in various fare classes, based on the top 70 routes.
BITRE defines the best discount as the cheapest fare available, excluding baggage surcharges, and covers Qantas, Virgin, Jetstar and Rex.