Airfares reach crazy new heights in post-Covid travel boom

Economy fares as high as $12,000 for Sydney-New York are now a reality for travel hungry Aussies as airlines seek to recover lost revenue and pay down Covid debt.

Airlines are taking full advantage of travellers’ pent-up demand. Picture: Nikki Short

The strength of the travel recovery has come at a high price for passengers, with airfares reaching frightening new heights as airlines take full advantage of pent-up demand.

Government data on domestic fares showed even the cheapest seats were at 15-year highs, while international airline tickets were creeping into five-figure territory on some routes — for economy.

In the case of Qatar Airways, travelling from Sydney to New York in November-December carried a $12,000 price tag, for one of the last few economy seats available.

Business class was another giant step up, with seats selling for up to $26,490 and not much less than $10,000 for travellers willing to fly via India.

Although wild fluctuations in the cost of jet fuel have contributed to the eye-watering fares, the strength of demand remained the major driver of prices.

Qantas planes in Sydney. Picture: Supplied

Author of Tourism Crises and Destination Recovery David Beirman said when borders first started to reopen, airfares were relatively cheap.

But that soon changed as airlines recognised the enormous appetite for travel and the opportunity that presented to their financial recovery.

“With respect to Covid, you had airlines losing money hand over fist for two years. You also had a situation where for the last 40 years airfares globally went down not only in real dollar terms but in actual dollar number terms,” Dr Beirman said.

“When I first started in the travel industry I was selling airfares from Sydney to Perth for $1000. In 2019 you could get an economy return fare to Perth for $300.”

When Covid hit, it quickly became apparent to airlines that running their business with razor thin margins was not sustainable, he said.

Public Holiday travellers queue and wait at Sydney Domestic Airport last week. Picture: NCA NewsWire / Nikki Short

“A lot of airlines had nothing in reserve and they quickly had to raise funds, which has left many of those carriers with a lot of debt.”

International Air Transport Association director general Willie Walsh said the industry had in fact taken on around $200bn worth of additional debt that would have to be repaid.

“The time frame for those repayments typically average about five years so that will influence how airlines respond as we come out of this crisis,” Mr Walsh said earlier this year.

Operating costs for airlines were also higher post-Covid, due to very low unemployment and the need to pay more to retain valued staff.

Air New Zealand chief executive Greg Foran said wage increases had been critical to keeping typically low-paid workers such as baggage handlers in the industry.

But he conceded that had meant hiking airfares by as much as 50 per cent to help cover costs.

“People are showing a willingness to pay that at the moment but if mortgage rates remain high, if inflation remains high that may not be the situation we find ourselves in, in a year’s time,” Mr Foran said.

Qantas chief executive Alan Joyce has also acknowledged the necessity of higher fares and suggested those looking for cheap seats could fly with low fares partner Jetstar.

On Friday a Qantas spokeswoman said last-minute fares had been high in response to school holidays and footy finals but some sharp fares still existed.

These included prices as low as $219 for Sydney to Singapore on Jetstar, and $262 for Perth to Bali.

Qantas also had some cheaper deals available including $1425 for Sydney-Seoul return, and $149 for Melbourne to Brisbane.

Webjet OTA chief executive David Galt said the average booking value for Europe airfares between June and August was a “whopping $2561” and $2614 for London.

However he said travellers could get much better deals for next year’s northern summer provided they moved fast.

“For example, we can see in Webjet’s data that there are flights from Melbourne or Sydney to London return in June 2023 from $1395,” Mr Galt said.

“One of Webjet’s top tips for Aussie travellers that are particularly budget conscious is to consider flying into alternate airports or cities, such as Paris and Rome, or Gatwick and Luton in London.”

Dr Beirman said it was likely airfares would moderate in 2023 as capacity returned and the “crazy” of 2022 subsided.

“I think we’re going through a crazy period where travel’s come back, airfares have been incredibly volatile and add to that the situation in Ukraine and fuel prices,” he said.

“By say the second quarter of 2023 I think the airlines will have probably got their operational acts back together again.”