Despite rising fuel costs, major airlines are announcing millions of discounted airfares in attempt to increase bookings. An RMIT expert explains the complexities currently facing the market.
Justin Brownjohn, Senior Manager, RMIT Aviation Academy
"It is an interesting time to be operating an airline in Australia. In one part of the market, we have a large disruption to fuel oil supply chains causing the cost of jet fuel to increase rapidly. In another, there is a cost-of-living crisis causing the travelling public to rethink their well-deserved holidays, which is causing the discounting of fares.
"While there are, of course, supply and demand market forces at play, what we're currently seeing is a little more nuanced. The nuance is coming from the addition of capacity adjustments.
"The Australian travelling public is used to seeing fares increase due to reduced capacity, but right now we are seeing airlines actively trying to attract passengers and feed them to parts of their network that are struggling.
"This is not just a simple sale to fill seats - this is an attempt to shift capacity to ensure routes are sustainable to ride out the current turbulence but also to create availability elsewhere in the system where higher fares from more price-elastic consumers can be commanded to offset the losses elsewhere.
"There is a reason revenue management is sometimes called the dark arts of aviation. Available inventory is always being optimised to gain the most yield. Once a flight departs and that seat is empty, it is spoiled revenue the airline can never get back."
Justin Brownjohn is the Senior Manager of the RMIT University Aviation Academy where he oversees the delivery of RMIT's flight training programs in Melbourne and Bendigo. He has over 20 years of aviation industry experience across Australia, Asia and the Middle East with a focus on network operations delivery and commercial decision making.
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