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Research by Flight Centre Travel Group (ASX: FLT) has shown that airfares have increased at about half the rate of inflation over the past five years, and less than a third of the pace of a broad range of daily consumer goods.
FCM Consulting, Flight Centre Corporate’s business travel consulting arm, has found that while the cost of living has hit Australians hard at cafes and supermarkets with items such as a takeaway cup of coffee and milk rising by between 38 and 83 per cent respectively, the cost of air travel has only increased by between 7 and 12 per cent since 2019.
The research has found that international business fares and domestic economy fares recorded the lowest increases while international economy fares were at the top end of the scale.
However, these pale in comparison to an 83 per cent increase in the price of a two-litre bottle of milk from $2.40 to $4.40, a 38 per cent increase in a takeaway cup of coffee from $4 to $5.50 and a 31 per cent increase in a loaf of bread from $3.40 to $4.45.
FCM Consulting director APAC Felicity Burke says the five-year average has been aided by a “gradual softening” of domestic fares over the last 12 months, leading to a 12 per cent drop in the cost of an economy seat at the beginning of 2025 compared to a year earlier.
“That has resulted in a relatively low five-year increase, despite the pretty sizable uplift we saw in the few years during and post-COVID,” she says.
“International business class tickets have fared the best over the past five years, with an overall increase of 7 per cent, while domestic economy fares followed at a growth of 8 per cent, and international economy fares rose by 12 per cent since 2019.”
The Flight Centre research shows that one-way domestic airfares have increased just $17 from $203 to $220 over the past five years, while international economy airfares are up $104 to $946 and one-way international business air fares have risen $377 to $5,777.
The travel group cites Reserve Bank of Australia data that shows a basket of goods and services valued at $1 in 2019 would have cost $1.20 in 2024, up 20 per cent which is based on an annual inflation rate of 3.8 per cent.
“When you compare the increase in the cost of travel against the rise we’ve seen for fuel, milk, bread, even a bag of apples, it really puts things into perspective,” says Burke.
“This comes while the cost of jet fuel increased by 25 per cent in 2024, compared to 2019, according to IATA (International Air Transport Association), but that does appear to be easing back towards 2019 levels in early 2025.
“Passenger numbers have lifted year on year, and domestic capacity levels still lag behind what they were pre-COVID, which reflects the growing operating costs and volume of demand airlines have experienced during this period.”
After previously targeting solid growth for FY25, Flight Centre last month downgraded its full-year profit forecast by up to 17 per cent due to volatile trading conditions and lower consumer confidence that was triggered by the US tariff war.
While the company said it remained on track to deliver record total transaction value, underlying profit before tax was expected to fall between $300 million and $335 million, sharply lower than the forecast range of between $365 million and $405 million.
The mid-range of the downgraded profit will be in line with the $320 million underlying pre-tax profit recorded by Flight Centre in FY24.
Burke says travellers should expect airfares to plateau in the short-to-medium term, with fares forecast to hold steady.
“What we can expect to see moving forward throughout the rest of the year is a balancing in the cost of fares – we don’t expect to see any significant increases outside of those seasonal variations that will come around holidays and major events,” she says.
“But don’t expect to see any significant or long-lasting drops in the price of flying domestically or internationally either.
“However, international flights will commence from next month off the back of the Virgin Australia and Qatar partnership, and they may move to stimulate demand by offering short-term bargains.”
Burke says “positive steps” in international airline capacity growth in recent months is good news for travellers.
“Domestic capacity has struggled to keep pace with the rate of demand on local routes over the past 12-18 months,” she says.
“International inbound capacity has been a better story. We’ve seen a lot of international carriers investing in this market over the last couple of years and recognising that Australians are big travellers.”
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