Fuel costs go down but prices don’t follow

With jet fuel costs spiralling downwards, consumers are still paying between 10% and 15% more for domestic airfares than at the same time last year, says a report.

Compared with January 2006, economy airfares are now 9.6% higher, business class fares 10.4% higher and “best discount fares” 14.6% higher according to figures from the Bureau of Transport and Regional Economics.

Commsec chief equities economist Craig James said the increases were unfair and prices needed to come down.

Qantas’s five dollar cut in its fuel surcharge on January 16, in response to a 25%drop in the cost of jet fuel since August, had been modest and overdue, Mr James said, adding, “For the fare-paying public, there’s still a duopoly to deal with.”  “Annual double-digit price rises are unacceptable. Competition is still not adequate to keep airfares down”.

Mr James said the Federal Government needed to consider the potential for airfare relief when it decided to approve a private equity consortium’s bid to take over the dominant airline, Qantas, adding if a takeover was accompanied by Qantas receiving less insulation from competition that would be a good thing, he said, “You could see a situation where a foreign airline like Singapore Airlines might fly into Perth, across to Sydney and then back to Singapore.”

He also said, “If domestic routes were more open to international carriers that would be one avenue to prevent airfares rising too fast”.

Report by The Mole