Qantas, Virgin airfares set to spike as fuel costs soar

The days of cheap flights to get people flying again post-pandemic could be over, with Qantas Airways and Virgin Australia chief executives flagging airfare hikes to manage soaring oil prices.

Virgin Australia chief executive Jayne Hrdlicka said her airline had already started increasing fares to cover rising fuel costs, which had doubled in 12 months since April last year.

However, strong international demand was helping the airlines absorb higher fuel costs, according to Qantas chief executive Alan Joyce, who was attending an industry conference on Sunday.

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New data released by NAB showed Australian travellers were spending more on overseas travel than before the pandemic, with its customers spending $157 million on overseas travel between January 1 and May 31, 2022.

Domestic demand for travel wasn’t as robust, however, which prompted Qantas to reduce local flight numbers in July and August in an effort to lift fares, Joyce said.

University of Technology Sydney senior tourism lecturer David Beirman suspected the brief period of cheap, post-pandemic flights was drawing to a close based on the signs he was seeing.

Beirman said airfare price hikes were “inevitable” given the headwinds facing the industry, including vast accumulated losses during COVID and rising oil costs.

Fuel costs account for between 40-60 per cent of an airline's expenses, so are a “major factor” in determining airfare prices.

Many airlines, especially the full-service airlines, tend to have hedged arrangements for purchasing fuel, which are usually six months long.

However, once these contracts expire, airlines face much higher prices when they go to renegotiate their deals.

He also said airlines around the world - not just Qantas and Virgin - had suffered massive financial losses due to two years of suspended or limited operations.

Plus, airlines are also suffering workforce shortages after shedding staff during the pandemic.

Beirman said airlines were struggling to attract workers back to the industry, which was driving up staffing costs as operators were having to recruit and retrain new staff.

Airlines were also facing increasing pressure to decarbonise, Beirman said, which would add to their expenses.

Yesterday, Qantas and Airbus announced $300 million to kickstart Australia’s sustainable airline fuel industry.

-With AAP

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