Chart of the week #16: Air travel is cheaper than ever and it's not even debatable
This week’s “chart of the week” is a reminder of just how good we’ve got it. For some reason, the discourse stinks of a peculiar stench of elitist nostalgia. It’s not your grandad’s nostalgia of “in my day we went to the movies for 5 cents”, but an elitism reminding us of the grand old days of aviation, when ordinary people dressed up to travel and the airline served you a lobster thermidor on the one and bit hour flight from Sydney and Melbourne.
Other than that never happening, what the nostalgia ignores is that aviation was expensive and unaffordable to most people. It was simply too expensive to fly the way we do now, for ordinary people! As we’ll see, air travel is cheaper and thus more accessible than ever …
It’s always been a popular narrative to complain about high airfares and declining service standards, but nothing could be further from the truth! In the case of Australia we have decent data on domestic airfares collected by BITRE. It’s not the best data for tracking short term variations in prices, but it gives us a good picture of longer term trends. The current series tracks the “best discount airfare” all the way back to October 1992. So what does it tell us? In inflation adjusted terms, domestic airfares have declined by 47% since 1992!
At the same time, Brent Crude Oil prices have increased by 69% in inflation adjusted Australian Dollars. Oil prices are an important benchmark as fuel is the largest variable cost that an airline faces. Fuel isn’t the only cost airlines face, but it’s a big one. For example, in FY24 it accounted for 27% and 24% of Qantas and Virgin’s costs.
There is a lot going on here affecting airfares, including the deregulation of the Australian market in 1990 that drove increasing efficiencies. But importantly, airfares began its rapid decline from the early 2000s, coinciding with rapidly increasing oil prices. This it’s also awkward for the complainers since this also coincides with Ansett’s bankruptcy (left without comment).
The picture is actually remarkable and how some see this as a failure rather than a triumph is absurd!
In case you missed it, here is our last “chart of the week” from a few weeks back! Thanks for reading and remember to subscribe and share!
