Expensive tickets, limited seats and cancellations: What is going on with airlines?

Key points
  • The Australian Competition and Consumer Commission has found domestic airfares have increased significantly.
  • Airlines are increasing prices to help relieve debt built up during the COVID-19 pandemic.
  • Experts say customers are unlikely to see lower airfares any time soon.
After two years of border closures due to the coronavirus pandemic, many Australians eager to book overseas trips have been faced with high airfares and limited availability.
Experts and airlines have told SBS News the situation is due to a number of coalescing factors, with consumers unlikely to experience relief anytime soon.

So what is behind the soaring ticket prices, can anything be done about it, and is this the new normal for airline travel?

High demand and limited capacity driving price rises

In September, the Australian Competition and Consumer Commission (ACCC) released its quarterly report into airline competition in Australia, which found domestic airfares increased significantly between April and August this year.

According to the ACCC, the cheapest economy airfares were 56 per cent higher in August 2022 than they were in April 2022 when they hit an 11-year low, while business airfares rose by 17 per cent 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 contributed to both domestic and international flight prices rising.
“For 50 years basically between about 1970 and the beginning of COVID-19 in 2020, airfares had actually gone down, year upon year, both in real dollar terms and in actual dollar terms,” he said.
“COVID-19 spoiled all of that … because of the incredible restrictions on airline operations, airlines were basically losing money hand over fist … so they built up this massive amount of debt, and most of them have to pay it back.”
Mr Beirman says many airlines are now increasing prices as part of an effort to relieve their debt, while simultaneously facing a lack of staff due to pandemic layoffs, which is contributing to issues such as frequent cancellations and limited flight options.

“The airlines have had a lot of difficulties to cope with,” he said.

“The other thing to note is factors such as increased fuel prices, trying to pay off losses, paying for new staff … a whole lot of different factors that really came into airfares actually going up.”
Monash University aviation expert Professor Greg Bamber agrees that a post-pandemic increase in demand combined with a lack of staff are creating a perfect storm when it comes to rising ticket prices.
“There is a high demand; people have not been able to travel to catch up with their friends and family or business customers or suppliers for nearly three years and there’s a big pent-up demand,” he said.
“So people trying to travel but there’s a reduced capacity … the airlines have cut the number of flights, so there’s a high demand for fewer seats, and the airlines have ratcheted up the prices.”

“Airlines are prioritising profit over people.”

Worst on-time performance on record, ACCC says

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

According to the ACCC, in July 2022 the domestic airline industry reported the worst on-time performance on record, and airlines cancelled flights at a rate over three times the long-term average.

When it comes to cancellations, Professor Bamber says airlines should be doing better.
“A giant airline like Qantas can cancel flights at a moment’s notice, causing us great inconvenience, and we are just expected to suck it up and have no compensation,” he said.
“And yet if the customer wants to change their flight for possibly a good reason, then Qantas will charge high penalties, even though rebooking costs them very little.”
Professor Bamber says airlines need to focus on rebuilding their staff after reducing numbers during the pandemic.
He says treating workers well is an essential factor in providing better experiences for customers.

“(Airlines) need to build in more of a buffer and realise there’s still a lot of illness around, and staff are sometimes going to be absent, so they need to have reserves ready,” he said.

“It’s in the interest of customers and the airline for the workforce to be treated well, but at the moment, many parts of the workforce feel that they’re not being treated well.”

What have the airlines said?

A Virgin Australia spokesperson told SBS News the airline was focused on providing value and choice to customers in the current situation of increasing demand, inflation pressure and high fuel costs.
“We have seen huge demand as Australians get back in the air to reconnect with friends and family and enjoy the travel experiences we all missed out on during the pandemic,” the spokesperson said.
“Virgin Australia continues to ramp up our domestic services and we expect capacity will be back around 100 per cent of pre-COVID levels in December and January.”
The spokesperson said Virgin Australia is also ramping up its short-haul international services.
On 13 October, in an operational performance update, Qantas said cancellations had fallen from 4 per cent in August to 2.4 per cent in September.
The airline said mishandled bags remained low at 6 per 1,000 passengers in September and into October.
On 23 November, Qantas said while fuel costs remain elevated, operational performance is improving.

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

Is there any relief on the horizon?

Despite the optimism from airlines, Mr Beirman says customers are unlikely to see lower airfares any time soon.
“To a certain extent, I guess we’ll have a plateau of higher levels and higher margins … and I think as we start to get the recovery into tourism, we’ll certainly level off and probably in some cases even come down a bit compared to what they were in 2019.

“But certainly, there is a slightly higher version of the new normal and it’s not just because of debt … it’s also because unless we get some resolution in this conflict between the Ukraine and Russia, that’s going to have an ongoing effect on fuel prices.”

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