Airfares hit maximum altitude as capacity constraints hit the market

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International airfares have doubled as blistering demand and shrunken capacity has enabled airlines to raise prices to combat higher fuel costs. | Elizabeth Knight | OPINION

Even in the face of a raging new wave in the COVID-19 pandemic, rising interest rates, and recession fears, consumers travelling in business class are shelling out more than $18,000 to get to Europe and the US while those in economy are paying fares of around $5000, according to Flight Centre chief executive Graham Turner.

The higher airfares helped to push Flight Centre’s total transactional revenue to $10 billion for the 2022 financial year but its return to pre-COVID levels requires airlines to increase capacity. Although Qantas’ and Flight Centre’s share prices reacted strongly to Flight Centre’s latest earnings upgrade - up 2 per cent and 5 per cent respectively, this sector has been threatening positive news for a while.

It said Qantas would be sensitive to recession but believed it was more resilient than it had been previously given its lower fixed costs and ability to adapt capacity to demand. It placed a 12-month price target of $6.55 - 42 per cent higher than it is currently trading.

 

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