Key Points
- Jet fuel prices have dropped globally reducing operating costs for airlines.
- The capacity of seats on planes has also increased.
- Australia’s airlines are launching new international routes later this year.
Cheaper jet fuel has driven down airfares for Australian travellers, and the price relief is expected to continue.
Domestic economy airfares were 12 per cent cheaper in the first two months of 2025 than the same time last year, according to data compiled by corporate travel advisers FCM Consulting.
That represents $29 off the average ticket price.
The price drop comes despite the Australian Competition and Consumer Commission (ACCC) claiming limited domestic competition was helping the country’s dominant airline groups — Qantas and Virgin — boost their profit margins.
While Qantas Group earnings before tax soared to $1.5 billion in the last six months of 2024, and Virgin Australia also announced record profits, market dynamics since the new year have also benefited travellers.
Jet fuel dropping in cost
Globally, jet fuel prices are down almost 17 per cent compared to the 2024 average, driven in part by economic uncertainty stemming from Donald Trump’s trade war, which has curtailed oil demand.
Fuel is the largest operating cost for airlines, so fluctuations flow through to airfares.
Ongoing weakness in jet fuel prices will continue to put downward pressure on airfares in the coming months, the ACCC predicts.
FCM Consulting director Felicity Burke said Australia and the broader Asia-Pacific region had experienced sharper drops in fares compared to the rest of the world.
“We’ve been saying for a long time now that global capacity increases and other factors like jet barrel cost reductions would go hand-in-hand with airfare price drops in various regions, and this is one of several reasons that we’re now seeing this come to fruition,” she told the Australian Associated Press.
More seats available
Another factor in the cost of air travel is seat availability.
Around the world, more seats are available on planes, contributing to falling costs for travellers on international economy flights.
Global capacity in May was seven per cent higher than in 2019 and five per cent higher than the same time last year.
International economy airfares out of Australia dropped five per cent in January and February compared to the same period last year, while business class tickets fell three per cent.
New flights on the way
More routes are set to launch in the second half of this year, with Virgin’s partnership with Qatar Airways adding further competition on the highly trafficked Australia to Europe corridor.
“Through this partnership with a world-leading global airline, we expect to not only create more choice for travellers but also drive healthy competition, which typically helps to place downward pressure on fares over time,” a Virgin Australia spokesperson told AAP.
Qantas will also launch new routes in late 2025, including Adelaide to Auckland and Perth to Auckland and Johannesburg.
