Qantas, Virgin launch domestic ticket deals to fill cash coffers in Iran crisis

Qantas and Virgin Australia are looking to fill their coffers with cash from domestic travel, as runaway fuel prices due to the Iran war raise questions about their international operations in the months ahead.

Both airlines have announced extensive domestic ticket sales, just a week after Qantas flagged a potential $800 million blow out in fuel expenses linked to the soaring energy costs caused by the open-ended conflict in the Middle East.

In a bid to keep passengers flying domestically as clouds gather over international travel, Qantas is touting a week-long sale of domestic tickets through to March 2027. One-way economy fares start at $99 on routes from east coast capitals, with one-way business fares starting from $299. The dates include both the King’s Birthday long weekend in June and the winter school holidays.

Virgin on Monday launched a sale of half-a-million economy fares in New South Wales (Byron Bay, Sydney and Newcastle) starting at $55 one-way from Sydney to Byron Bay and $255 between Sydney and Perth. In a nod to the energy shock and jitters over long-haul flying to Europe, Virgin said its sale is “helping make local travel more accessible”.

The airline acknowledged the “modest” increase in overall fares linked to the fuel price shock, which is expected to add $30 million to $40 million to its fuel bill in the June half. It also wants to maintain accessible Velocity Frequent Flyer Reward Seats for members of its loyalty program.

The Mideast conflict has crippled Persian Gulf-based airlines like Emirates, Virgin-partner Qatar Airways and Etihad through attacks and threats to their hubs by Iranian drones and missiles. At the same time, Iran has closed the Strait of Hormuz, through which oil bound for Asian refineries – and Australian airlines – passes. Crude oil prices have jumped, while jet fuel, refined in smaller volumes, has surged higher.

Oil prices hovered at about $US60 a barrel in the past year, before reaching $US112 in early April. Sustained higher oil and jet fuel prices have forced Qantas and Virgin – and international peers – to trim capacity and cut routes.

Griffith University Professor of Aviation Tim Ryley said airlines are doing all they can to keep cash flowing in “a dynamic and disruptive environment”.

“They are having to move quickly,” he said. “Airlines which are more agile and dynamic are more likely to succeed in these kinds of scenarios.”

Airlines can’t simply repeat what worked well for them in the past when it comes to network planning and pricing, Ryley said. For carriers today, the strategy is less about “rigid planning” and more about “crisis management” and “dynamic, adaptive planning,” he explained.

Qantas Domestic CEO Markus Svensson said that “Australians’ appetite for travel continues” and this week’s sale would “support our customers planning their next trip around Australia over the next 12 months”.

Salim Hijazeen, associate lecturer of aviation at Swinburne University of Technology, said the airlines are keen to sustain demand in the current market conditions.

Unlike during the COVID crisis, when people’s desire to fly cratered, this week’s ticket sales show that “demand for travel is still there despite the increase in fuel prices for airlines”, he said.

In flagging its jump in fuel costs last week, Qantas also said growth in its international unit revenue per available seat kilometre (RASK) in the second half was “now expected to be 4 to 6 per cent”, double the previous forecast.

Virgin, in announcing its higher fuel cost, expected domestic RASK growth of 5 per cent for the six months to June, and 6 per cent for the June quarter. Previous guidance was 3-4 per cent for the June half.

Hijazeen said the “airlines are already generating good revenue per seat, so these sales are more about stimulating additional demand and keeping passenger load factors high”.

Load factor is critical in aviation because once a flight departs with an empty seat, that revenue is lost forever. The domestic sale was a welcome move for passengers in the short term, Hijazeen said, warning that “once these sales end, we may see higher average fares if fuel prices continue to rise due to the ongoing conflict”.

Qantas’ sale of 2 million domestic seats runs until April 28, unless sold out before then. Virgin’s sales, for travel dates from May to December, runs until April 26, unless sold out prior.

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