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Capacity crunch! Book flights now before airfares rise

May 24, 2019 Headline News No Comments Email Email

Now is the time to book international flights, with jet fuel costs rising, airlines about to cut capacity on routes to and from Australia after many years of rapid growth – and fares poised to climb.

All the conditions are in place.

Airline flight schedules show the total number of seats being flown out of Australia is set to flatten and then fall marginally (by about 1%) from late October to late March – representing the first international capacity decline during the southern summer since 2005, a business report in the Sydney Morning Herald notes.

This follows a decade of steady growth, about 5% a year, in the number of seats on international routes to and from Australia.

Initial IATA financial results for April indicate a further year-on-year fall in aggregate profits for the airline industry, putting more pressure on carriers.

Oil and jet fuel prices have risen about 45% over the past two years. They climbed again in April 2019, driven by the ending of US sanction waivers on Iranian oil imports. The Brent crude oil price is now about USD 72 per barrel (36% higher than the end of 2018) as a result of increased tensions in the Middle East. See: US issues chilling warning to airlines flying over Gulf

The Herald report quoted Tony Webber, a consultant from Airline Intelligence and Research (and a former Qantas chief economist), saying Chinese carriers had added too many services to Australia too quickly.  Middle Eastern airlines including Emirates are rationalising capacity.

This means “there will definitely be higher fares”, Webber deduced.

Emirates will cancel its daily Dubai-Bangkok-Sydney service from next week and Cathay Pacific is cancelling its Cairns-Hong Kong service.

A couple of days ago, IATA, in its Airlines Financial Monitor for April 2019, said global available aircraft seats increased 0.4% month-on-month in April 2019, following a 1.2% decline in March 2019 due to the grounding of the Boeing 737 MAX.

As reported by CAPA Centre for Aviation: “Seat growth eased 0.2% year-on year to 4% in April 2019, the lowest annual increase since May 2013. 107 aircraft were delivered, down from 117 in April 2018. The number of aircraft delivered in the first four months of 2019 was 399, lower than the 455 delivered in the same period in 2018.”

Written by Peter Needham

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