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Carbon tax: Domestic airlines to increase ticket prices

Virgin Australia is set to increase ticket prices by $3 per sector


Australia’s leading domestic airlines have announced they will pass on Australian Government’s carbon tax directly to consumers, with airline tickets set to rise up to $3.50 per sector.

Just hours after Prime Minister Julia Gillard’s announcement on Sunday night (July 10), Qantas said it had no option but to pass-on the tax to the travelling public.

“The Australian Government’s introduction of a carbon price system from July 1, 2012 will have an estimated cost impact of approximately $110-115 million on the Qantas Group in the financial year ending June 30, 2013,” the airline said in a statement.

“Domestic airlines will be exposed to the full starting carbon price of $23 per tonne through an increase in aviation fuel excise from July 2012 and will not have access to transitional assistance or compensation arrangements. International aviation fuel will be excluded from the carbon price scheme.

“In the context of the significant challenges facing the global aviation industry, the Qantas Group will be unable to absorb the additional costs associated with the carbon price and there will be a full pass-through to customers.

“Based on the estimated additional costs, the Qantas Group expects that the price of a single domestic flight sector will increase on average by approximately $3.50 in FY13.

“Fare increases will vary depending on sector length and will be communicated transparently to consumers,” the airline said.

The $3.50 will be added to Qantas, QantasLink and Jetstar tickets, while Virgin Australia has also announced the carbon tax will be added to all domestic fares, with prices set to rise $3 per sector.

Turboprop operator Regional Express (Rex) says the impact of the tax could be far greater than just an extra couple of dollars on ticket prices, warning some marginal routes could be cut.

Rex Chief Operating Officer, Chris Hine, said a number of other contributing factors – including the removal of the en-route rebate scheme for regional airlines, the additional fuel excise to increase funding to CASA and increased security screening at regional ports – could have dire consequences.

“The combined effect of these measures on Rex alone would equate to at least $6m per annum,” Hine said. “Rex has already announced in its release of June 1, 2011 that the outcome of these measures could be the loss of air services to half a dozen marginal regional ports like Taree and Grafton.

“I foresee many regional operators without the financial strength and diversification of the Rex Group being forced out of business once these take effect after July 1, 2012. Those surviving will have to cut back on marginal routes in order to remain in business. This will unfortunately mean that some regional communities will suffer the loss of their essential air services.

“We call on the Federal Government to consult with regional aviation with the hope that the Government will strongly reconsider its position on regional air services before it is too late.

“Given the extremely fragile state of regional aviation in Australia today, once an operator goes out of business it could become irreversible as the returns are too slim and uncertain to attract new entrants,” Hine said.

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