Who pays $60,000 for a holiday? Aussies do

And so we descend into another episode of illustrative economics where inelastic supply causes an explosive spike in prices when demand goes through the roof: the World Cup, for which many Aussies are paying premium rates.

Try to get an airline seat to South America in the next month and there’s little change from $5000 return at peak times, while $200 hotel rooms are said to be going for $1000 or more per night.

For most Australians, demand is highest in the first fortnight of the month-long tournament, which stretches across Brazil (geography trivia: its land mass is 10 per cent bigger than Australia’s) from Manaus in the Amazon, to Porto Allegre near the Uruguayan border in the south. Australia isn’t expected to survive the first round in the so-called Group of Death against Chile, Spain and the Netherlands.

And, if you think those African game safari packages are expensive, wait ‘til you fall in love with the round-ball game: I read of one Aussie fan who paid $60,000 just for round one match tickets, air fares and accommodation to the 2010 World Cup in South Africa – and, in Australian world travel terms, that’s just a short hop of 13 hours from Sydney (to Johannesburg).

Since the 2014 World Cup’s national arena is so much larger, Brazil’s airlines are said to have scheduled an extra 1500 flights to cope with the influx – both into and around the country.

But that doesn’t mean air fares will be anything resembling cheap.

Last October, as the first reports of gouging began to emerge, the Brazilian government announced that it was creating a “working group” to look into the soaring prices of flights, hotel rooms and restaurants during the World Cup month.

However, under Brazilian law, all airlines and hotels are free to set their own prices and, if there is one thing that airlines everywhere have always done, it is to gouge with the best of them – because they can – when demand exceeds supply.

For example, tickets on the 330-kilometre air shuttle from Rio de Janiero to Brazil’s biggest city Sao Paolo, normally start at around $50 one-way.

But around World Cup final time in Rio on July 12, the best fare for the 30-minute flight is around $500 return – even if you booked months in advance.

About a decade ago, especially for long-haul travel, airlines began going off the widely held idea that they should schedule a raft of special services for events like the World Cup.

Apart from the disruption to their normal service patterns which they have honed over years to be reliable and profitable, special flights have to be backloaded with cheap fares for those services leaving before they’re required.

Nevertheless, Qantas has added extra flights from Sydney to Santiago, Chile, during the World Cup period and extended some services to Rio de Janiero with its own 747s as a supplement to its normal code-shared connections with Chile’s Lan.

Around the world, Qantas is now focused on pursuing a “hub-to-hub” strategy with its alliance partners like American Airlines and Lan. The three-weekly Sydney-Santiago 747 services, in addition to Lan’s daily Airbus A340 service via Auckland, are still at an embryonic stage and, even with events like the World Cup, are often more pricey than its flights to Los Angeles 700 kilometres further away (although currently on special for $1499 return compared with $1599 for LAX).

In the long term, Qantas’s prize will be non-stop services to Sao Paolo – the business capital of South America’s biggest economy – which is even closer (13,386 kms versus 13,804 kms) than Dallas, Texas, which Qantas will soon serve non-stop six days a week with A380 super-jumbos.

If you’ve already left for Brazil or are booked to go in the next month, tell us about the deal you got. Did you pay through the nose or were you happy to? Should there be a government-level crackdown on price-gouging? What is your own solution to price-gouging by airlines and other suppliers for special events (like the AFL football finals)?