Business class fares hit 20-year low

The fight between Qantas and Virgin Australia for lucrative corporate passengers has driven fares for business-class seats on domestic routes to their lowest levels in real terms in almost 20 years.

The latest government figures for business-class fares in July reveal the extent of the price war under way as Virgin attempts to break Qantas's stranglehold on the corporate travel market.

The statistics, released today by the Bureau of Infrastructure, Transport and Regional Economics, show business-class fares at their cheapest levels - when adjusted for inflation - since records began in October 1992.

Business-class fares in July were also more than a third cheaper in real terms than they were in 2003 - the baseline for government aviation statistics.

The rate compares with June when business-class fares were almost 19 per cent less than the baseline.

The bureau conducted a survey of fares last week for flights taken at the end of this month.

Shares in Qantas, meanwhile, fell 2 cents to $1.06 today - not far above an all-time low of 97 cents struck on June 8 - while Virgin's stock rose half a cent to 38.5 cents.

Market grip

Qantas has held a vice-like grip on Australia's corporate travel market - estimated to be worth about $3.5 billion a year - since Ansett's collapse in September 2001.

But Virgin's attempt to reshape itself as an upmarket competitor has forced the airlines to resort to heavy discounting to win large corporate clients.

A senior executive at a top-200 Australian company described as "bloody" the fight between Virgin and Qantas for the firm's travel account.

The significant discounting of business-class fares first became noticeable in November.

Qantas, Jetstar and Virgin have also been boosting flight frequencies and using bigger planes on domestic routes, which will dent significantly the earnings of the airlines in the new financial year.

On the country's key business route - Sydney to Melbourne – the number of flights is expected to rise 18 per cent to a peak of 92 a day in November.

However, a fall in jet fuel prices has provided the airlines a small buffer against strong competition in domestic and international travel markets.

Since reaching almost a one-year high in March, jet fuel prices in Singapore have fallen 17 per cent to about $US114 a barrel.

The story Business class fares hit 20-year low first appeared on The Sydney Morning Herald.

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