Air fares cheapest for decade

Air fares are at their cheapest in more than a decade as airlines discount tickets in a contest for budget travellers, writes Jonathan Dart.

The managing director of Webjet, David Clarke, has calculated that international fares have fallen, on average, by 40 per cent, and domestic fares by about 20 per cent, this year.

He said a range of factors had contributed to the bargains: a fall in demand for first-class and business-class tickets, increased capacity, greater competition and a fall in the number of tourists travelling from countries such as the US.

But the main trend has been a shift in consumer sentiment. Passengers are hunting for budget tickets and are not willing to pay the normal fare.

New carriers such as Tiger Airlines have joined the domestic market in recent months, and Delta Air Lines will break into the trans-Pacific market in July.

Return fares to Los Angeles are about $1000, down from about $2000 a year ago, while return tickets to London cost about $1500, down from $2500.

"A major discount on domestic air fares was launched (last) Wednesday morning and the reaction from the travelling community was absolutely instantaneous," Mr Clarke said. "By 9am we were running at absolutely peak levels, so the market is very, very sensitive to bargains. It waits for them, it hunts them out."

A Flight Centre spokesman, Haydn Long, said there had been a fall in demand for long-haul international flights.

Mr Clarke said: "Where we've most noticed the change is the premium long haul, the top end of the market. The adventure market has been quite strong all year - those guys who are the backpackers and are not concerned about mortgages or job security."

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While there is disagreement as to how long the discounting will last, Mr Long said current prices were unsustainable.

But for businesses, at least, the thrift mentality will be hard to shake.

Linda Brettell, managing director of Sanford Travel in Sydney, is working with a large number of her corporate clients to adjust to the recession.

She said there had been a significant reduction in first-class and business-class travel and an increase in teleconferencing as an alternative to travel.

But she said there were some important caveats for businesses trying to cash in on airlines' race to the bottom, with strict conditions being placed on the discount fares.

"Companies are going best fare or the cheapest fare of the day, however it is not always in their best interest - companies need to consider the real cost," Ms Brettell said.

"Buying the cheapest flights and pre-paying accommodation in full prior to travel leaves no flexibility for changes or cancellations and companies are forfeiting hundreds of dollars when travel plans change," she said.

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