Airfares to rise with Qantas to fare better: CBA

Commonwealth Bank of Australia (CBA) said that airline passengers in Australia are likely to see double-digit increases in domestic airfares and rises of up to 7% in international tickets as carriers deal with soaring fuel prices (The Australian/The Australian Financial Review, 03-May-2011). CBA made the forecast as the country's second-largest airline Virgin Blue announced plans to hike surcharges on travel to the US on V Australia more than 45% and added AUD10 per sector to Virgin and Pacific Blue domestic and international airfares. Virgin Blue's surcharges remain lower than those imposed by Qantas. "We should see double-digit fare growth in the next three months, if you add up all the changes, and probably like 6 to 7% if you look at international," the bank said. "That will go some way toward addressing fuel but not all the way." CBA expects Qantas, with its larger share of the less price elastic corporate market, to be better able to make the price increases stick. Virgin was more likely to lose price-sensitive customers, but needs to increase fares to cover costs, the bank said. "There's no point in mucking around with ancillary revenues and these things at the margin. They've got to get significant increase in fares across the board."