Why Is Flying In Australia So Expensive?

A big country with a small population means flying in Australia is never going to be a bargain-basement proposition. Historically, flying in Australia has been expensive. In addition to this point, other factors have been a lack of competition and a traveling public prepared to pay for the high priced fares.

Flying around Australia need not be expensive. Photo: Getty Images

But over the last 20 years or so, flying in Australia has become less expensive. Increased competition, the rise of low-cost carriers, and a shift in public expectations have contributed to this. The upshot is, flying in Australia need not usually be expensive.

A rise in competition and changing operators

But about 30 years ago, a shift in government policy opened up the domestic airline market to competition. There were several ill-fated attempts to start-up airlines to compete with Qantas and Ansett.

In the late 1990s, Virgin Blue began operating in Australia with just six Boeing 737s. They introduced the low-cost carrier concept to Australia. Virgin Blue got a big leg up when Ansett collapsed in 2001. Over the following years, Virgin Blue became Virgin Australia, morphed into a full-service carrier, and collapsed in April.

A Virgin Blue aircraft back in the mid-2000s, before it was renamed and morphed into a full-service carrier. Photo: John via Flickr

Responding to the threat Virgin Blue threat, Qantas introduced its own low-cost product in the early noughties. Jetstar was an experiment many thought would fail. But it went on to become a low-cost juggernaut and a model for how full-service carriers can successfully operate a low-cost subsidiary.

Fares can be cheaper now than 30 years ago

Between them, Virgin Blue and Jetstar introduced low-cost fares to the Australian domestic market. That’s largely continued up to the start of this year.

Indeed, on a short leisure sector, fares are often cheaper now than they were in the 1990s. I remember paying AU$85 for a one-way walkup fare on East-West between Coolangatta and Sydney around 30 years ago. In 2019, by the time I paid for a seat and a bag on a low-cost carrier, I’d be paying about AU$70 to fly the same route.

Entry-level fares on short sectors are often cheaper than what was available 30 years ago on airlines such as East-West. Photo: Daniel Tanner via Wikimedia Commons

In his Jetstar review, Paul Lucas paid AU$139 for his flight between Adelaide and Sydney, a distance of about 1,300 kilometers.  Paul was pretty pleased with the value.

For the best part of two decades, Jetstar and, to a lesser extent, Tigerair have ensured there was a tier of low-cost fares available in Australia.

Across at the two full-service airlines, the situation was more mixed. Their base fares have been higher but not unreasonably so. Whereas a base fare between Sydney and Melbourne on the low-cost carriers would typically be under AU$100, Virgin’s base fare was usually around AU$130, and Qantas’ entry-level fare on the route was about AU$160.

Of course, that was subject to demand and seasons; a 17:30 departure on Friday afternoon will always cost more than a 10:30 Saturday morning flight.

Fares in premium cabins skyrocket

It’s in the premium cabins of both Qantas and Virgin Australia where the fares really get out of hand. On the same sector between Sydney and Melbourne, Qantas will regularly put an AU$1,300 plus fare onto a business class seat for the 90-minute flight. Take it from me, business class on a Qantas 737 isn’t that great. Virgin Australia was rarely far behind Qantas in pricing, but always slightly more competitive.

On the long sectors across the continent, premium cabin fares reached eye-watering heights. On a busy day, AU$2,000 fares weren’t unusual for a flight up to Darwin, and the transcontinental run across to Perth could easily cost AU$2,500 each way. At least the 5-hour run over to Perth would usually be operated by A330s. Both Qantas and Virgin Australia have a top-shelf business product on these aircraft.

Premium fares are ludicrously expensive on the longer domestic routes but the cabins can be good. Photo: Qantas

Whether anybody ever paid these fares is an open question. For example, an entry-level sale fare and an ‘upgrade me’ bid on Virgin Australia could see you in business class heading over to Perth for under AU$600 – a lot less than its upfront fare.

Expensive premium cabin fares but cheap main cabin fares

So, like many markets, different tier classes of fares have developed in Australia. Yes, premium cabin fares are stupidly expensive, but there are also value fares out there. Sophisticated frequent flyer programs and hordes of points savvy passengers mean most people dip their toes into the different fare tiers and carrier types to extract maximum value.

But this established state of affairs has been turned on its head this year.  Domestic flying schedules have been heavily cut as demand collapsed. These days Qantas is running around 160 domestic services weekly, and Virgin is offering approximately 75 weekly flights. Jetstar is operating a small number of services. Virgin’s low-cost subsidiary, Tigerair, isn’t operating any services.

Virgin Australia subsidiary Tigerair is grounded and unlikely to fly again. Photo: Getty Images

Both Qantas and Virgin Australia have been citing low demand as reasons for only running very minimal domestic services. No doubt, some services are poorly patronized, but stories are also emerging of full flights and sky-high ticket prices.

Scarce flights and pricy seats if heading to Sydney

To test that, I began searching a couple of flights one week ahead on two of my regular runs; Melbourne to Sydney and Melbourne to Perth. Sydney to Melbourne usually is one of the world’s busiest routes, with scores of daily flights to choose from. Perth is a less busy run but is often an excellent chance to spend some points and fly in comfort.

As a rule, I’d be looking at a cash fare of between AU$130 and AU$160 to fly to Sydney on either Qantas or Virgin Australia and a sub AU$100 fare on Jetstar. Going to Perth, I’d try to snag a sale fare on either Qantas or Virgin Australia for around AU$200 and wrangle an upgrade from there. I wouldn’t go to Perth on Jetstar. I don’t mind the airline, but I have a two-hour low-cost carrier rule.

Here’s what I found heading to Sydney on Wednesday, June 10. Qantas had a couple of flights, but they appeared sold out, and they were referring me to the sole Jetstar flight. Jetstar wanted AU$241 before paying to pick a seat or check-in bags. It’s pricy for a 90-minute flight on a low-cost carrier.

Source: Qantas

$500 plus to fly on Jetstar?

Still, it wasn’t as bad as what Jetstar wanted if I needed to fly next Monday. For AU$573 on Jetstar, I’d want to go to Honolulu, not Sydney. On the plus side, this fare does include a bag, a preferred seat, and a meal voucher.

Source: Qantas

Virgin Australia’s flight to Sydney next Wednesday is already sold out

Source: Virgin Australia

So I tried the following day, Thursday, June 11. Sure, the airline could carry me. The fare is AU$470. That includes a bag and an allocated seat but no catering. Even in the best of times, with a free muffin and terrible coffee thrown in, that fare is a solid AU$300 more than its usual price. I’d rather drive.

Source: Virgin Australia

What’s my take here? There’s probably room for a few extra flights on this sector. It might be unfair, but running a threadbare service and charging higher than usual fares could smack of opportunism and profiteering.

Four times the distance to Perth but cheaper fares on offer

It’s about four times the distance between Melbourne and Perth than it is between Melbourne and Sydney. So it’s interesting that the lead-in fares across to Perth are generally cheaper than what’s available on the shorter sector to Sydney on the same day.

Qantas has one flight between Melbourne and Perth next Wednesday. Its lead-in economy fare of AU$352 is not unreasonable for one week out. The search engine would not generate any availability for business class. Qantas also offers the option of a Jetstar/Qantas combo with a detour through Sydney.

Source: Qantas

Virgin Australia’s lead-in economy fare is typically priced just below the Qantas offer. Again, it’s not a bad price. Virgin Australia is also offering business class fares. However, the lounges are currently closed and the flights are on a 737 with recliner seats rather than the lie-flat “The Business” product on the typical transcontinental flights. Service is also pared back.

Whether it’s worth AU$1799 is debatable, but right now, it’s the most comfortable way across the Nullarbor next Wednesday.

Source: Virgin Australia

A mixed bag of fares

Despite some claims of profiteering, the current fares are a bit of a mixed bag. The fares to Perth are reasonable, but those prices for the premium cabin do highlight a certain sharpness in premium cabin pricing in Australia. Down the back of the plane, prices are higher than usual out of Melbourne if heading to Sydney.

Until the current situation normalizes, inexpensive airfares in Australia will be a rare thing. But when things do get back to normal, as they invariably will, cheap fares will re-emerge, proving that it is possible to fly around Australia without melting your Mastercard