Holidaymakers may enjoy super-cheap airfares as low as the $1 flights of the past due to Virgin Australia's buy up of Tiger Airways, but it will be short-lived, say analysts.
Virgin, which has acquired a 60 per cent stake in the struggling budget carrier, plans to expand Tiger's fleet of 11 planes to 35 and bring "budget airfares to more of Australia", a Virgin spokeswoman said on Friday.
Some aviation analysts say any fare discounting as a result will be more likely due to a marketing ploy rather than any increase in competition with the other budget carrier, Jetstar Australia.
But others say there is a real possibility of increased competition. "I would say they [prices] would at least hold and potentially go down," said Neil Hansford chairman of Strategic Aviation Solutions.
The Australian Competition and Consumer Commission's approval of the acquisition has effectively created a duopoly with the Qantas-Jetstar and Virgin-Tiger partnerships, but the ACCC feared Tiger would leave Australia in the next few years, as it was losing some $60 million a year.
"[ACCC chairman Rod] Sims was going to be the architect of prices going up [if he didn't approve the joint venture] in Australia, so he had no choice anyway," Mr Hansford said.
"So effectively for the consumer it is of great benefit."
Aviation analyst Peter Borkovec, of White Funds Management, said in the long term Virgin and Qantas will "find some kind of happy medium".
"Virgin might use [discounting] as a marketing strategy … but in the longer term I think we won't see these crazy prices," he said.
A spokesman for flight retailer Flight Centre Haydn Long said he wouldn't be surprised to see the $1 gimmick airfares of the past as Virgin and Tiger will have to become "creative".