Travel |

Airfare pain eases as pricing power swings back to passengers

Angus Whitley | Bloomberg News (TNS)

Qantas Airways Ltd., not known for usually offering big discounts, has cut prices more than six times this year. Virgin Australia is averaging at least one fare sale a month. Even Ryanair Holdings Plc, which practically invented affordable European air travel, says flights are getting cheaper.

Passengers around the world are winning some respite from the fare madness that followed the pandemic — and further price declines are coming.

It’s a partial rebalancing of power from the post-COVID demand surge that gave airlines almost free rein over fares. As travel restrictions lifted and the world rushed to reconnect, prices ballooned for the reduced number of seats that were available. Premium fares reached more than $20,000.

Now, falling fares reflect the growing number of international flights on offer, particularly in Asia and Europe, and a traveling public that is increasingly cost conscious.

“It’s not just a blip, it’s a global trend,” said James Kavanagh, chief executive officer of leisure at Brisbane-based travel agency Flight Centre Travel Group Ltd. “Airlines certainly don’t have all the power at the moment.”

International fares globally fell 6% in the first six months of 2024 from the year-ago period, Flight Centre said. Flights out of Australia were 13% cheaper, while fares to Indonesia — home to Bali, one of Australia’s favorite getaways — slumped 18%, Flight Centre said.

Prices will continue to fall as the cost-of-living crisis makes consumers more price-sensitive, Kavanagh said. With under-pressure airlines seeking to fill planes months before departure, there are deals for early bookers, he said, citing 10-day tours to China, including flights and accommodation, on offer for A$999 ($658).

Greater Bay Airlines, which flies between Hong Kong and a handful of destinations around Asia, is offering hundreds of return flights for just HK$20 ($2.56) each. Qantas, where fares usually align with its full-service brand, cut the price of more than one million seats on domestic flights to as little as A$109. The snap offer was the airline’s sixth local sale of the year.

To be sure, the trend isn’t uniform. Qatar Airways CEO Badr Mohammed Al-Meer, for example, said in an interview that passenger demand was accelerating for the Gulf airline.

At the same time, a shortage of commercial aircraft and ruptures to aviation’s supply chain are constraining capacity. Wait times for the most popular aircraft from Boeing Co. and Airbus SE are years long. Airbus CEO Guillaume Faury said at the Farnborough Air Show on that the manufacturer is turning down some orders because of its huge backlog. To some degree, these factors limit how far ticket prices can fall.

All the same, declining fares are troubling some airline bosses and unsettling investors. The Bloomberg World Airlines Index, which includes American Airlines Group Inc., Air China Ltd. and Deutsche Lufthansa AG, is down around 15% in the past 12 months.

Emirates President Tim Clark, in an interview at the Farnborough Air Show, lashed out at the way some airlines have suddenly cut fares, warning it risked triggering “a race to the bottom.”

“It only takes one of the big players to do it and everyone goes the same way,” Clark said. “They need to hold their nerve. The characteristics of the segments that drive our business have altered, so align your price points to that and it’s a growing story, not a shrinking story.”

“As far as I’m concerned, as long as the A380 to Heathrow is full six times a day and I can get the kind of yield I’m getting, I’m not going to change,” he said.

Ryanair recently cut its outlook for ticket prices in the crucial summer travel period and said fares will be “materially lower.” Consumers have become “just a little bit more frugal,” the airline’s chief financial officer, Neil Sorahan, said on a call. Shares in Ryanair are down about 26% this year.

©2024 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.