From the pub­lisher

Travel Bulletin - - CONTENTS - Bruce Piper

How low can they go? Much has been made in re­cent months of the bar­gain in­ter­na­tional air­fares cur­rently avail­able, as car­ri­ers con­tinue to pile on ca­pac­ity into the Aus­tralian mar­ket. Ev­ery week it seems there’s a new sale, and while con­sumers are clearly the win­ners, some in the in­dus­try are warn­ing that the clearly un­sus­tain­able and ir­ra­tional pric­ing be­hav­iour must surely lead to a cor­rec­tion. Last month a num­ber of agents con­tacted me about a Xi­a­men Air­lines econ­omy class fare from Syd­ney/mel­bourne to China, where the nett price was just $8 re­turn. That’s not a typo – the car­rier was charg­ing just $8 to take some­one to China and back. Of course there was a fuel sur­charge which more than dou­bled the fare to a whop­ping $18.60 – and then those pesky Pas­sen­ger Move­ment Charges and air­port fees which boosted the price to a to­tal of $434. Re­turn from Aus­tralia to China! And that wasn’t just to a Xi­a­men Air­lines long-haul port – the fare in­cluded do­mes­tic ad­dons tak­ing pas­sen­gers to 23 dif­fer­ent ports within China. That’s just one ex­am­ple, but there are plenty of oth­ers. China Eastern last month took the un­prece­dented step of offering a “buy one get one free” fare for Aus­tralian pas­sen­gers – and not just to China but right across its net­work to North Amer­ica and Europe. Busi­ness class fares to North and South Amer­ica are now reg­u­larly of­fered for not much more than $4,000, and one agent high­lighted a Bri­tish Air­ways econ­omy fare from Lon­don Heathrow to Syd­ney which cost his client just £203. When you con­sider that travel agents are try­ing to earn a liv­ing from the small com­mis­sion payable on these fares it is clear that there’s just not enough money in it to pay for a cup of cof­fee, let alone run a busi­ness. The mi­nus­cule mar­gins in dol­lar terms mean an­a­lysts are well ad­vised to give lit­tle cre­dence to TTV figures. Travel busi­nesses which have large turnovers some­times tout their over­all rev­enue as an in­di­ca­tor of in­creas­ing mar­ket share and busi­ness ac­tiv­ity – but there’s no point in hav­ing a large TTV if you’re ef­fec­tively los­ing money on ev­ery trans­ac­tion. The same goes for air­lines – they have lots of seats to fill, but at prices like these the yields must be prac­ti­cally non-ex­is­tent. And amidst all that ca­pac­ity con­tin­ues to grow – for ex­am­ple, Sin­ga­pore Air­lines plans to boost its Syd­ney fre­quen­cies to five daily in the com­ing months! As they say in the clas­sics, “some­thing’s got to give”. Los­ing money on ev­ery ticket is not a sus­tain­able way to run a busi­ness. Let’s hope that things start to come down to earth soon – with a soft land­ing rather than a crash.

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