Why is it cheaper from UK than From Aus?

[mysavings789]

well, i think it depends on the market and environment!

 

[WillBlack]

Its not just the direct competition between the airlines that is at play. There are exactly the same number of airlines and flights AUS-UK and there are UK-AUS. The difference is in how the market operates.

Many Australians, rightly or wrongly, tend towards Qantas first when looking to travel overseas. They may compare prices with some major, well known airlines such as SQ, CX, BA. But many Australians don't even consider the 15 or so other airlines that can sell them a ticket for the same route, some of which may not even be operating the aircraft on some of the sectors.

The market often operates very differently in Europe and the UK. Potential customers will consider all flight options when looking for the bets deal. This approach has been established as Uk folks regularly seek cheap options for their summer sunburn sessions in France, Spain etc where they treat the flight like a bus ride to their holiday destination.

So while the products available may be the same, the "competition" is different in that the markets behave differently. Its not a matter of more competition from the UK, but a matter of a different market environment.

Airlines selling fares SYD-LON return include China Airlines, Malaysian, Jet Airways, Air France, KLM, Finnair, Aeroflot, Swiss, Gulf Air, Turkish Airlines, Royal Jordanian, Austrian Airlines, Qatar Airlines, Royal Brunei Airlines, SAS, Malaysian Airlines, Etihad, Virgin Atlantic, British Airways, Qantas, Air Mauritius, South African Airways, Alitalia, Emirates, Aerolineas Argintinas, Air New Zealand, Eva Air, Korean Airlines ...

And that is before looking at the true LCC options such as Air AsiaX or combinations of LCCs on separate tickets.

So there is plenty of competition between airlines selling fares on the route. Qantas has an advantage for sales ex-Australia in that many Australian passengers are willing to pay more to travel with Qantas - whether through patriotism or ignorance. While people purchasing in the UK may be more familiar with more of the airlines mentioned above and more likely to give them a go.

Picking some random dates June and looking at published fares via ExpertFlyer I note that the cheapest SYD-LON-SYD is A$1200 on China Airlines (fare basis SCR3MEU). Not a bad price.

And the cheapest LON-SYD-LON is GBP297 on Etihad (fare basis QSP6MGB). A real bargain at around A$617.

Thanks for that informative post. I notice that the cheapest you found was ~$600 cheaper from UK-Aus-UK than Aus-UK-Aus. Close to my ~$500.

I found that the ACCC (Australian Competition and Consumer Commission) has tangled with IATA (International Air Transport Association):

ACCC seeks input on IATA airline fare setting
The ACCC has issued a discussion paper examining the setting of international passenger fares between IATA member airlines.

The paper is one in a series being issued as part of an ACCC review of immunity provided 20 years ago for a range of IATA activities.

www.travelweekly.com.au/articles/bb/0c0318bb.asp

ACCC extends immunity for IATA passenger agency program

M2 PRESSWIRE-3 May 2007-ACCC: ACCC extends immunity for IATA passenger agency programC1994-2007 M2 COMMUNICATIONS LTD RDATE:03052007 The Australian Competition and Consumer Commission today granted authorisation* to the International Air Transport Association for certain aspects of the IATA Passenger Agency Program on...
resources.bnet.com/topic/iata+and+marketing.html

International Air Transport Association (IATA)
(Much waffle - if someone can find a solidus in the bull...., please let us know)
www.iata.org/index.htm

(sorry about having to change . to # in links to avoid this site's anti-spam spasms)

Is the "ineffective competition" the result of IATA's activities and has IATA bamboozled the ACCC and Australian flyers?

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I keep getting the "no-links for members with less than 10 posts anti-spam message - I have not been able to post new messages, so I'll try adding to this one.
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Well, seems the USA Department of Transport (DOT) and Mr Edward Hasbrouck think that IATA's activities are anti-competitive.

On 5 July 2006 the USA Department of Transportation issued a proposal to eliminate the long-standing exemption from USA antitrust law of the International Air Transportation Association (IATA), insofar as it pertains to joint airline "traffic conferences" to fix industry-standard airfares between the USA and Europe or the USA and Australia. (If the proposal is put into effect, IATA would remain exempt -- at least for now -- from USA rules against acting as a price-fixing cartel with respect to airfares on routes everywhere else in the world, including for example between the USA and Asia, Africa, and Latin America.)

http://www.hasbrouck.org/blog/archives/001080.html

IATA, is it the cause of "ineffective competition"?

 

[stryker]

I found that the ACCC (Australian Competition and Consumer Commission) has tangled with IATA (International Air Transport Association)

Sounds a bit like the ACCC's attempts to control petrol pricing.

 

[WillBlack]

Look up International Air Transport Association (IATA) on wikipedia:

"To this end, airlines have been granted a special exemption by each of the main regulatory authorities in the world to consult prices with each other through this body. However, the organisation has been accused of acting as a cartel, and many low cost carriers are not full IATA members."

http://en.wikipedia.org/wiki/IATA

 

[jpk]

Its not just the direct competition between the airlines that is at play. There are exactly the same number of airlines and flights AUS-UK and there are UK-AUS. The difference is in how the market operates.

snip

This is one of the best posts I have read on AFF. I have lived in London and can attest that this is precisely the situation.

 

[Travel Guru]

The other factor to take into consideration on this topic which relates to Y and Y+ fares is seasonality.

Just because it's low season for ex AU departures doesn't mean it's the same ex UK, and the price differential between L and H season can often run upwards of $500.

Obviously its not the only consideration and market forces do play a part, but if you're going to make a true comparison, it must be done apples for apples on the same seasons.

TG

 

[Dave Noble]

Obviously its not the only consideration and market forces do play a part, but if you're going to make a true comparison, it must be done apples for apples on the same seasons.

TG

This is true, though less so on business/1st fares which tend not to have seasonal adjustments. It has been my experience that fares in premium cabins can be got , typically, at much better prices from UK/Europe to Australia than vice versa.

taking a fair comparison of BA/QF and EK on LHR-SYD r/t for July and SYD-LHR r/t in Jan

LHR-SYD

Business
BA R class $7335 plus tax and fines
EK C Class $6620 plus tax ( inclusive of fuel fines)

First
BA A class $9604 plus tax and fines
EK A class $11,033 plus tax ( inclusive of fuel fines)

(this is ignoring current sale where EK is $7000 in A)


SYD-LHR

BA R class $8700 plus tax and fines
EK C class $9490 plus tax ( inclusive of fuel fines)

BA F (no A listed) $16,979 plus tax and fines
EK A class $12,420 plus tax ( inclusive of fuel fines)


Dave

 

[WillBlack]

The other factor to take into consideration on this topic which relates to Y and Y+ fares is seasonality.

Just because it's low season for ex AU departures doesn't mean it's the same ex UK, and the price differential between L and H season can often run upwards of $500.

Obviously its not the only consideration and market forces do play a part, but if you're going to make a true comparison, it must be done apples for apples on the same seasons.

TG

BA's UK-AUS-UK lowest fares currently quoted are from 2009/Oct/04 to 2009/Nov/11.

QA's Aus-UK-Aus lowest fares currently quoted are from 2009/Sep/02 to 2009/Nov/11.

The lowest for both simultaneously occurs from2009/Oct/04 to 2009/Nov/11 with BA being $563 cheaper during that time.

BA is always cheaper than QF with the minimum difference being $225 (eg 2009/Sep/2), average $742, median $601, maximum difference $1338.

The dates of increases and decreases of fares by BA & QA are not always exactly the same but allowing few days difference, the peaks and lows of the fares occur at nearly the same time of year.

So regardless of season, BA is cheaper than QA and even at the lowest overlapping season, BA is $562 cheaper than QA.

So, yes, seasonality must be considered and was.

The thing needing explanation is not just why BA return flights out of UK are cheaper than QA return flights out of Aus, but why is it also cheaper for BA or QA return flights out of UK relative to BA and QA return flights out of Aus? And why is it similarly cheaper for the cheapest airline from UK relative to the cheapest airline from Aus.

How does IATA enforce the higher fares for fares originating from Aus?

International Air Transport Association

International Air Transport Association - Wikipedia, the free encyclopedia

 

[Dave Noble]

The thing needing explanation is not just why BA return flights out of UK are cheaper than QA return flights out of Aus, but why is it also cheaper for BA or QA return flights out of UK relative to BA and QA return flights out of Aus? And why is it similarly cheaper for the cheapest airline from UK relative to the cheapest airline from Aus.

There is nothing to explain. The fares in different countries vary. Just look at the ATW fares for example; depending on the country, the fares are different. Airlines will charge that which the market will bear.

How does IATA enfource the higher fares for fares originating from Aus?

IATA doesn't regulate airlines own fares. There are IATA listed fares ( carrier code YY ) but these ( generally ) are not purchased by customers but purchase airline's own fares. IATA fares are great in that they allow travel on any IATA carrier



The IATA fares

SYD-LHR via Asia / LHR-SYD via Asia

$10634 economy / $10680
$15540 business / $14972
$20962 1st / $25454

SYD-LHR via Americas / LHR-SYD via Ameicas

$14420 / $13919
$19668 / $19722
$23511 / $29531


SYD-LHR

 

[WillBlack]

There is nothing to explain. The fares in different countries vary. Just look at the ATW fares for example; depending on the country, the fares are different. Airlines will charge that which the market will bear.



IATA doesn't regulate airlines own fares. There are IATA listed fares ( carrier code YY ) but these ( generally ) are not purchased by customers but purchase airline's own fares. IATA fares are great in that they allow travel on any IATA carrier



The IATA fares

SYD-LHR via Asia / LHR-SYD via Asia

$10634 economy / $10680
$15540 business / $14972
$20962 1st / $25454

SYD-LHR via Americas / LHR-SYD via Ameicas

$14420 / $13919
$19668 / $19722
$23511 / $29531


SYD-LHR

Thanks for the reply but regretfully "nothing to see, move along, cough up" will not cut it for me just yet at least.

As I can only guess what ATW is, could you include a link to "ATW fares" please.

I think I'll pass on the IATA fares, thanks, but my only choice to avoid IATA fees is not to fly into or out of Aus. Can you say with any justification that IATA does not assist airlines with transfer pricing?

 

[Dave Noble]

Thanks for the reply but regretfully "nothing to see, move along, cough up" will not cut it for me just yet at least.

Why does a big mac cost a different amount in Australia to USA?

Dave

 

[serfty]

...
As I can only guess what ATW is, could you include a link to "ATW fares" please.
...

ATW: Around The World

• Abbreviations and Explanantions

 

[WillBlack]

Why does a big mac cost a different amount in Australia to USA?

Dave

Because USA'ns won't allow imports of big macs made in Aus?
Big Mac Index (2008/Jul/24)
Country Big Mac Price Implied PPP rate + Today's
Exchange Rate
1 USD = Over(+) / Under(-) Valuation against the USD, % ++ in Local Currency in US dollars United States$ 3.573.57---1---ArgentinaPeso 112.94313.083.7375-17.592AustraliaA$ 3.452.49370.971.3835-29.888
FXBigMac - World economics based on the hamburger standard

Why does it cost a quarter of the total fare more for an aeroplane to load up, take off from Aus, fly about for a bit then land and unload in Aus relative to an aeroplane landing in Aus, unloading, reloading and taking off from Aus for the return trip to UK?

Are Australian charges higher, is fuel more expensive, can't the airlines adjust their fares according to exchange rate movements? What please?

 

[NM]

Thanks for the reply but regretfully "nothing to see, move along, cough up" will not cut it for me just yet at least.

If you have read all the responses in this thread, and still do not understand, then there is little more explaining that can be done for you.

As I can only guess what ATW is, could you include a link to "ATW fares" please.

ATW = Around The World. This includes fares such as OneWorld Explorer and the Star Alliance ATW fares. These are defined by the alliance and have different published rates for each country in which they are can be purchased. They vary based on what the alliances believe people are willing to pay for the fare from each country.

I think I'll pass on the IATA fares, thanks, but my only choice to avoid IATA fees is not to fly into or out of Aus. Can you say with any justification that IATA does not assist airlines with transfer pricing?

Why do you believe IATA has anything to do with the price that QF or BA or any other airline decides to sell their fares?

Do you have any justification that IATA does have any influence in the airlines setting their own fares?

IATA's role in processing payments between airlines is independent of the airline's process of deciding how much they way to charge their customers.

If you want to avoid IATA, then stick to LCC operators such as Air Asia/X (D7) who are not members of IATA (and why, by the way, still have differential pricing based on country of purchase). Have a look at D7 fares and you will see they also vary significantly depending on the country of purchase. They only sell one-way fares and its often double the cost for say STN-KUL vs KUL-STN, or MEL-KUL vs KUL-MEL. And as D7 is not a member of IATA, there is no way to blame IATA for that discrepancy.

Without IATA playing the role of moving funds between airlines, airlines would have two choices:

• operate as non-member airlines do now, only able to sell seats on their own flights, or
• establish their own individual contractual relationships with each of their partners so they can sell seats on each other's flights

An example of the second approach would be Jetstar's agreements with Qantas, or Virgin Blue's codeshare and interline agreements with UA, DL, SA.

Non-IATA member airlines such as D7 believe that can make money by only selling their own seats or having a limited number of partner agreements. This is the LCC model and it works for some.

IATA member airlines believe the most efficient way to deal with their partner airlines is via IATA.

Both models have their advantages and you have the choice of whether you purchase a fare from an IATA member or a non-IATA member. The list of IATA member airlines is available here.

 

[NM]

Why does it cost a quarter of the total fare more for an aeroplane to load up, take off from Aus, fly about for a bit then land and unload in Aus relative to an aeroplane landing in Aus, unloading, reloading and taking off from Aus for the return trip to UK?

Are Australian charges higher, is fuel more expensive, can't the airlines adjust their fares according to exchange rate movements? What please?

You continue to miss the point. The cost to purchase a ticket does not need to be reflected in the cost to operate the service. The ticket price for an individual seat does not need to reflect the cost of flying that seat to the destination.

The airline sets the fare prices at rates they believe will provide enough revenue to operate their business. This takes into account how many tickets they can sell in a given market. If they set the price ex-UK and ex-AU to be the same, they will find they can't sell any seats ex-UK due to the different market conditions that exist in the UK. It has NOTHING to do with the fact that it costs the same to fly someone LON-SYD-LON as it costs to fly someone SYD-LON-SYD. They set the price in the UK based on current market conditions in the UK and the need to earn a certain amount of revenue to operate their business. Similarly they set the ex-AU price according to local market conditions.

Its also important to understand that the airlines consider revenue at several levels. The revenue for a particular ticket sale is of least importance to them. They consider the total revenue for the flight, which is a mix of fares ranging from the cheapest sale fare prices, through the corporate discount fares, through the full-flexible fares through to the premium cabin fares. Then they consider the total revenue for all flights to ensure the right mix of discounted fares and revenue is being achieved.

Another factor that could come into play with the discount fares is the mix of discounted fares vs more expensive fares sold in the region. It may well be that airlines can sell a higher proportion of lesser-discounted fares in the UK, allowing them to also sell more heavily discounted sale fares to fill the aircraft. There are many factors affecting the local markets. The direct cost of carrying a passenger is not necessarily reflected in airline ticket prices.

 

[WillBlack]

If you have read all the responses in this thread, and still do not understand, then there is little more explaining that can be done for you.

ATW = Around The World. This includes fares such as OneWorld Explorer and the Star Alliance ATW fares. These are defined by the alliance and have different published rates for each country in which they are can be purchased. They vary based on what the alliances believe people are willing to pay for the fare from each country.

Why do you believe IATA has anything to do with the price that QF or BA or any other airline decides to sell their fares?

Do you have any justification that IATA does have any influence in the airlines setting their own fares?

IATA's role in processing payments between airlines is independent of the airline's process of deciding how much they way to charge their customers.

If you want to avoid IATA, then stick to LCC operators such as Air Asia/X (D7) who are not members of IATA (and why, by the way, still have differential pricing based on country of purchase). Have a look at D7 fares and you will see they also vary significantly depending on the country of purchase. They only sell one-way fares and its often double the cost for say STN-KUL vs KUL-STN, or MEL-KUL vs KUL-MEL. And as D7 is not a member of IATA, there is no way to blame IATA for that discrepancy.



Without IATA playing the role of moving funds between airlines, airlines would have two choices:

• operate as non-member airlines do now, only able to sell seats on their own flights, or
• establish their own individual contractual relationships with each of their partners so they can sell seats on each other's flights

An example of the second approach would be Jetstar's agreements with Qantas, or Virgin Blue's codeshare and interline agreements with UA, DL, SA.

Non-IATA member airlines such as D7 believe that can make money by only selling their own seats or having a limited number of partner agreements. This is the LCC model and it works for some.

IATA member airlines believe the most efficient way to deal with their partner airlines is via IATA.

Both models have their advantages and you have the choice of whether you purchase a fare from an IATA member or a non-IATA member. The list of IATA member airlines is available here.

I read all the responses and none have convinced me of anything other than that looking at the pricing of non-IATA airlines might provide insight.

The only argument presented which I find sensible is brand loyalty; locals thoughtlessly paying over the odds for familiarity. This argument falls, in my opinion because there is not one airline, that I know of so far, which offers cheaper return fares out of Aus than return fares into Aus.

I'll take a look at AirAsia X, perhaps that will invalidate the IATA conspiracy hypothesis:

http://en.wikipedia.org/wiki/AirAsia_X

http://www.airasia.com/

 

[oz_mark]

I read all the responses and none have convinced me of anything other than that looking at the pricing of non-IATA airlines might provide insight.

Try it from a yield management perspective then:

1) Yield management is a process designed to maximise seat sales at an optimal price to maximise revenue per flight

2) The goal of yield management is to ensure each flight is as full as possible and each passenger pays the maximum they are willing to pay

3) Price setting reflect the fact that passengers have different needs and different sensitivity to the price of a flight

4) Successful yield management will then match a range of fares with a range of passengers

From experience, airlines know that Australians will pay more for a a retun flight than someone in London doing the reverse, and so the fares in Australia are set higher.

 

[equus]

Try it from a yield management perspective then:

1) Yield management is a process designed to maximise seat sales at an optimal price to maximise revenue per flight

2) The goal of yield management is to ensure each flight is as full as possible and each passenger pays the maximum they are willing to pay

3) Price setting reflect the fact that passengers have different needs and different sensitivity to the price of a flight

4) Successful yield management will then match a range of fares with a range of passengers

An excellent approach to understanding what it going on, although I would have described the objectives of yield management slightly differently.

1) Yield management is a process designed to maximise revenue per flight (over simplified, as it is designed to maximise revenue over time - so one flight may be compromised in order to gain an overall better result, but considering "per flight" may help to grasp what is going on here.

2) The goal of yield management is to ensure that price points are established so most seats get sold for no less than someone was willing to pay for one (and nothing gets sold at an incremental loss, unless it is supporting some other goal).

3) Price setting attempts to only allow cheaper fares when it is not anticipated that a higher price will be paid.

4) As there will be a mix of different fares - and most importantly different numbers of fares along the scale from lowest to highest, it is impossible to even estimate total gross revenue just by comparing the differences at the low end.

As an example (and basing this somewhat on the A$500 being quoted here as the difference in the low end). A very simple example, assuming 80 seats available to be sold, all the same.

Flight 1 has the following breakdown:

8 Seats at $800
8 Seats at $1,000
8 Seats at $1,200
48 Seats at $1,500
8 Seats at $2,000
Total revenue = $112,000 (average $1,400 per seat)

Flight 2 (which appears to be generating more revenue when comparing only the cheapest fares)
72 Seats at $1,300
8 Seats at $2,000
Total revenue = $109,600 (average only $1,370 per seat)

The black art of yield management (it is by no means a pure science) is in working out what can be sold at which price point, and then adjusting the prices on remaining inventory up until the last minute.

From the point of view of the premise which seems to run through this thread - that people buying from the UK won't pay as much, and look for the cheaper deals, it may well be that a few fall into that category, but in equal likelihood, there may be a greater number willing to pay higher fares from the UK!

I guess the point I am trying to make, is unless you know how many seats are being sold at all the different prices - not just the lowest you can see, there is no way of determining the overall profitability of the pricing structure.

 

[WillBlack]

I discussed with frequent flyer friends why Aussies might pay more:

Aussies have to travel longer. Once bitten by a tediously long nasty flight experience or jet lag, thrice shy. Rather pay a bit more for something at least known to be passable.

On the other hand, Europeans used to short flights might not yet have been bit and might percieve less risk of inconvenience or discomfort and place less value on avoiding it.

 

[WillBlack]

I'll take a look at AirAsia X, perhaps that will invalidate the IATA conspiracy hypothesis:

AirAsia X - Wikipedia, the free encyclopedia

Welcome to AirAsia.com, The World's Best Low-Cost Airline

UK-MY-AUS-MY-UK
$A2.03 / £1.00; $A1 / 2.55 MYR

Economy:

1. Mon 05 Oct 2009 London (STN) to Kuala Lumpur LCCT (KUL), fare
£171.00, charges £58, total £229; $A 464.87

2. Mon 05 Oct 2009 - Kuala Lumpur LCCT (KUL) to Melbourne (MEL), fare
529.00 MYR, charges 111 MYR, total 640.00 MYR; $A 251.00

3. Thu 05 Nov 2009 - Melbourne (MEL) to Kuala Lumpur LCCT (KUL), fare 529.00 MYR, charges 243 MYR, total 772 MYR; $A 302.75

4. Thu 05 Nov 2009 - Kuala Lumpur LCCT (KUL) to London (STN), fare
£121.00, charges £13, total £134; $A 272.02

TOTAL $A 1,290.64

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