Australians should brace for a permanent era of significantly higher domestic airfare prices, according to a leading aviation expert, even if geopolitical tensions in the Middle East eventually subside. Keith Tonkin, Managing Director and Principal Consultant of Aviation Projects, has issued a stark warning that the days of cheap flights are likely over as carriers aggressively seek to recover substantial financial losses.
A New Cost Reality for Domestic Travel
Tonkin stated that Australians must prepare to fork out considerably more money when booking domestic flights. "It's feeling a lot like Covid again," he told the Daily Mail. "There's talk about work-from-home arrangements, limiting travel - and that's not with the consequence of catching a virus - but it still has a profound impact on the way people plan their activities and interact with each other."
Shifting Travel Patterns and Rising Demand
The former Qantas and Royal Australian Air Force pilot anticipates a significant shift in travel behaviour, with more Australians opting for destinations within Australia, New Zealand, and the Pacific Islands as travel through volatile regions like the Gulf remains precarious. However, this domestic and regional pivot is expected to create its own inflationary pressure.
"We saw that too during Covid - people still possess a strong desire to travel," Tonkin explained. "So if international options are constrained, we are likely to see those travel intentions change, concentrating demand on fewer, safer routes. This concentrated demand is almost certain to hike prices even further."
Immediate Airline Actions Confirm the Trend
This warning comes as Virgin Australia confirmed it will increase the price of domestic airfares by five per cent. A Virgin spokesperson cited rising costs across the aviation sector, "now significantly exacerbated by the situation in the Middle East," as the reason for the necessary fare adjustments.
This move follows similar actions by other carriers. Australia's national carrier, Qantas, raised prices on its international flights earlier this month and announced fortnightly reviews of its domestic fares. Its budget subsidiary, Jetstar, also increased airfares last week after the cost of jet fuel nearly doubled in under a month.
Expert Advice for Cost-Conscious Travellers
Faced with this new reality, Tonkin advises travellers to be more strategic. He recommends carefully considering the necessity of each trip and diligently comparing airlines when making bookings over the coming months.
"Travellers should take advantage of any discounts or airfare sales wherever they can," he urged. "At the moment, it feels like those base fares are on a relentless upward trajectory, and they might hold at elevated levels for a considerable while."
The Delicate Balance for Airlines
Tonkin described the airlines' need to increase fares as "natural" in order to preserve cost control and some level of profitability. However, he warned carriers face a precarious balancing act.
"There's a serious consequence to increasing fares too much, as people may simply choose not to travel, and then the airlines lose the revenue altogether," he cautioned, highlighting the fine line between recovery and pricing out the market.
Broader Fuel and Supply Chain Pressures
The aviation sector's challenges are compounded by wider energy market volatility. Energy Minister Chris Bowen has indicated that more fuel could be released from Australia's national reserve should the Middle East crisis persist.
While assuring there is ample fuel to meet needs through April, Bowen acknowledged that the situation beyond late April remains uncertain and is heavily dependent on international events. Oil prices have soared following Iran's de-facto closure of the Strait of Hormuz, a critical chokepoint, in retaliation for US-Israeli strikes.
The government has already released one-fifth of the national petrol and diesel reserve, with 500 million litres directed to regional areas. Furthermore, government subsidies will continue for Australia's two remaining oil refineries in Geelong and Brisbane following six months of negotiations.
Despite the current turbulence, Tonkin retains a long-term view for the industry. "The aviation industry will come back. It always does," he concluded. "People have an innate need and desire to explore the world. We will see it recover, but we'll just be talking about a new normal of higher airfares for some time to come."
