Australian domestic airfares tumble as airlines wage a capacity battle

Australian domestic fares have tumbled in the past year as Tiger claws its way back into the market from its grounding in 2011, and Qantas and Virgin Australia continue to slug it out for overall market share.

It is unlikely that the pressure on fares and thus yields will let up in 2013 as Tiger continues to add capacity and Virgin and Qantas, along with Jetstar, stick to their targets to add between 7% and 9% capacity in the first half of the current financial year.

All those extra seats should keep a lid on any fare rises, and if Virgin is given the regulatory green light to take effective control of Tiger Australia, along with the promised investment to expand the LCC, there is a real prospect that fares will reduce even further.