Australian airfares could surge by 20 per cent on pre-Covid levels after the government’s widely-touted half-price holiday scheme ends, experts fear.
From April 1, Australians will be able to buy airline tickets at 50 per cent off to 13 popular destinations including the Gold Coast and the Sunshine Coast, and more out-of-the way places such as Alice Springs, Kangaroo Island and Broome.
Travellers will be required to travel interstate – something out of reach for months because of border closures – as part of the $1.2billion federal government subsidy package for the Covid-hit aviation and tourism sectors.
Fat Prophets head of research Greg Smith warned that after the taxpayer subsidies ended on July 31, domestic and international airfares could surge by 20 per cent on pre-Covid levels.
This is because the scheme will likely allow Qantas to claw back revenue lost during the pandemic, giving it a greater market dominance over its rivals – and putting it in a better position to increase prices later.
Australian airfare prices could surge by 20 per cent on pre-Covid levels after the half-price holidays end, experts fear. Pictured is a Qantas plane landing in Sydney in February 2021
‘I don’t think there’s going to be a price war, if anything it’s going to go the other way,’ Mr Smith told Daily Mail Australia.
‘You could expect ticket prices to sort of go up, potentially 10 to 20 per cent – there’s going to be a lot of pent-up demand.’
Last year, Qantas chief executive Alan Joyce bragged the flying kangaroo’s market share would grow as its rival Virgin Australia shrunk to survive – meaning less competition in the market.
‘In fact, over time, our domestic market share is likely to increase organically from around 60 per cent to around 70 per cent, as our main competitor changes its strategy,’ he told the company’s annual general meeting in October.
Mr Smith said that without sufficient competition from Virgin, and more demand for air travel as borders reopened, Qantas would be in a position from August 2021 to recover its pandemic costs with higher airfares.
‘If they’re getting 70 per cent market share, that certainly bodes well for them and this is going to enable them to leverage that domestic recovery even more,’ he said.
‘Having more market share, it may be in a better place to do that.
‘The industry will obviously want to recoup some of the losses they incurred in 2020.’
Mr Joyce last year also lobbied the government against bailing out Virgin Australia, as it teetered on the verge of collapse before US private equity group Bain Capital bought it in September.
Last year, Qantas chief executive Alan Joyce bragged the flying kangaroo’s market share would grow to 70 per cent as its rival Virgin Australia shrunk to survive
Virgin Australia CEO Jayne Hrdlicka previously ran Qantas budget subsidary under Mr Joyce.
Former Australian Competition and Consumer Commission chairman Allan Fels, now a professorial fellow at the University of Melbourne, said the airfares subsidy would do very little to help Virgin become more competitive against Qantas.
‘I wouldn’t expect it to alter market shares significantly,’ he told Daily Mail Australia.
Mr Joyce said the airfares subsidy would cover 57 routes will be covered on the Qantas and Jetstar network.
The discount means a return ticket from Sydney to Cairns which currently costs $233 could be as little as $116.50.
A return between Melbourne and the Gold Coast, which is now on sale from $130, could cost just $65.
Experts fear after the taxpayer subsidies end, domestic and international airfares could surge by 20 per cent on pre-Covid levels as crude oil prices increased. Pictured is Surfers Paradise on the Gold Coast – one of the 13 destinations where flights are half price thanks to a $1.2billion federal government program
To get their half-price tickets, Australians simply need to head to the Qantas, Jetstar or Virgin websites after April 1 and they will see the dramatically reduced fares.
The Qantas share price surged by 2.5 per cent to $5.30 on Thursday, following the federal government announcement.
Mr Smith said airfares would increase as a global economic recovery pushed up crude oil prices back towards $US70 a barrel for the first time since 2019 before the pandemic.
‘I’m not so sure you’ll be seeing gouging – it will be costs that have to be passed on to the consumer,’ he said.
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