Winter holiday fares on the march

Though it might not be immediately apparent, the graphs of what happened to air fares 18 months ago were foretelling the future.

The beginning of 2012 was when the evolution of Virgin down under led it to the irresistible conclusion that there was indeed a gaping hole in the market left by the collapse of Ansett in 2001.

So Virgin Australia replaced the backpackers budget carrier Virgin Blue and became a hybrid sort-of-full-service carrier with business class up the front.

Critically, in 2012, what companies were paying for business class travel fell off a cliff (see the BITRE graphs) as Qantas faced its first domestic competition at the premium end for more than a decade.

But, just as significantly, what companies were paying to move their people around in economy class – without all the restrictions of discount tickets – rose steeply.

the next two months before the spring break starting on September 20 offer the best chance for cheap fares.

In the interstate air travel business, the second half of 2012 featured an old-fashioned airfare war, but fought mostly at the premium end. Thousands of new seats and flights flooded the market as Virgin imported six new A330-200 widebody jets to fly the longest domestic routes across the Nullabor.

Well, something had to give and we're seeing it on holiday routes this winter. The Bureau of Infrastructure Transport and Regional Economics' monthly snaphshot shows airfares are up in all categories in July, with "best discount" rates – that is, the lowest fares in the market – up almost 10 per cent compared with the same time last year.

After the 2012 bargains war, business class fares were almost 18 per cent higher than the same time last year.

After last year's jump, full economy fares registered the smallest increase of 3.8 per cent while restricted economy fares rose 5.8 per cent.

The only restraint on winter holiday fares to Queensland has been Tiger's decision to set up a jet base in Sydney, which means the New South Wales capital is getting the benefit of very cheap discounts to Cairns and the Gold Coast for the first time – as well as new services to Brisbane and Mackay, which Tiger is promoting as the gateway to the Whitsundays.

With NSW and Victorian schools returning from holidays this morning, the next two months before the spring break starting on September 20 offer the best chance for cheap fares.

Tiger is the only one with regularly available sub-$100 one-way fares from Sydney to the mid-to-high-20s temperatures of North Queensland (Cairns), though, at a quick glance, Cairns is quite a bit more expensive for Melburnians with the pitch starting at around $120 – plus the "booking fee" of $8.50 per sector.

In fact, that credit card charge of $68 for four return air fares remains a major turnoff for families using Tiger, when it's less than half that for Qantas ($28).

Mind you, all four airlines persist in charging astronomical mark-ups to book via credit card when the whole electronic payment system was designed to save merchants money.

However, if you're looking offshore for a holiday, the transaction becomes more complicated. The starting price for a Bali airfare is around $800 return from the Australian east coast, but, of course, the accommodation is cheap, starting at $10-$30 a night, while $100 gets you four-star. In Australia, $100 gets you a downmarket motel room.

Occasional specials of around $500 return from Sydney or Melbourne pop up to Fiji, but around $700 appears to be the starting rate and you're likely to be paying substantially more than Bali rates for accommodation.

Further afield, the reduction in the value of the Australian dollar makes the northern hemisphere summer more expensive, but the past few years of parity or better have spoiled us. I can't see the number of Australians travelling overseas each year dipping significantly below the current eight million any time soon.

Are you having a winter holiday this year? Have you booked Australia or overseas? Where is the best value?