lowest air fare

Australian air fares slashed in January

AIRLINES have slashed fares for their cheapest tickets to fill seats on domestic flights amid poor weather, fragile consumer confidence and an abundance of capacity, new figures suggest.

The Department of Transport's domestic air fare index, which monitors changes in the cost of air travel, found Australia's major airlines sharply lowered their "best discount" tickets at the start of 2011.

These fares are typically bought by price-sensitive leisure travellers.

The best discount index came in at 48 index points in January, the lowest level recorded since the index began in 1992.

It was well below 53.4 index points in the prior corresponding period and much lower than 75.4 points in December.

Centre for Asia Pacific Aviation (CAPA) executive chairman Peter Harbison said lower fares were likely to continue in the period ahead as Qantas and its fully-owned low-cost offshoot Jetstar faced off against Tiger Airways and Virgin Blue.

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"It's going to be a very aggressive market this year," Mr Harbison said today.

"That is good for consumers."

Mr Harbison said the figures also highlighted "weakness in the disposable income part of the economy".

The awful weather in Queensland over the traditionally peak travel period of Christmas and New Year had also impacted on demand for seats.

Fat Prophets analyst Colin Whitehead said the leisure sector dominated air travel in Queensland, with popular seaside haunts stretching from the Gold Coast in the south of the state to Cairns and Townsville in the far north.

And even when the devastating floods - which have caused billions of dollars damage and the death of at least 15 people (as of Thursday afternoon AEDT) - subside, Mr Whitehead said parts of Queensland were likely to remain a no-go zone for tourists for quite some time.

Also, Mr Whitehead said airlines may face difficulties keeping airfares low to stimulate demand through 2011 as oil prices crept towards $US100 a barrel due to supply constraints.

Instead, carriers would have to consider reducing frequencies or pulling out of certain routes altogether.

Meanwhile, tickets for seats at the front of the plane crept a little higher in January, with the measure of business class fares up 3.8 index points to 99.2 points in January, compared with the prior corresponding period.