The arena for a price war is no longer limited to grocery shelves between supermarket giants Coles and Woolworths. It has gone up 30,000 feet into the Australian sky as Qantas and Virgin Australia battle for corporate travelers.
Australian airlines are scrambling to reconfigure their international service flights to stay afloat and recoup losses incurred on steep price cuts to fend off lingering threats of competition, reports said.
As the two dominant Australian air carriers fight for a larger share of the profitable domestic market, airline ticket prices for business class seats are down at their lowest levels in two decades.
Data from the Bureau of Infrastructure, Transport and Economics released on Wednesday said that business class fare, even when adjusted for inflation, was at record-low levels since the agency started to monitor air fares in October 1992. In real terms, business-class fares were a third lower compared to 2003 rates.
The two airlines started to cut their business class fare in November 2011, aviation industry observers said. Besides reducing their ticket prices for premium seats, Qantas, Virgin and even Jetstar increased their flight frequencies and flew larger jets on domestic routes for a larger slice of the domestic travel market.
For instance, Virgin is set to return to Mount Isa which abandoned the Brisbane-Mount Isa route in 2011. Virgin was convinced to return to the route after it signed an agreement with Xstrata in May to provide a Monday to Friday service using a 92-seat Embraer E-190 jet beginning August 8.
The resumed service now targeting miners would have the Virgin plane leaving Brisbane at 8:40 a.m. and departing from Mount Isa at 9:10 a.m. The Virgin trips would be earlier than Qantas which monopolised the route since 2001.
Queensland Airport said work was underway to accommodate Virgin passengers in the check-in area and modifications are being made to the airport's equipment in the departure lounge to accommodate Virgin's software.
However, the cutthroat competition is expected to impact the bottom line of the air carriers, particularly Qantas which has forecast a nosedive in profit. Virgin's cheapest airfare for the Mount Isa-Brisbane route is $370 for a two-way ticket while the same trip costs Qantas passengers $548.
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