Jim Eagles: Shop around for bargains

Are the good times over for air travellers?

In the final three months of last year Statistics New Zealand recorded an overall increase in international air fares of more than 10 per cent.

In fact the rising cost of flying overseas was the main reason why inflation in the December quarter was a lot higher than expected.

Does this mean the era of cheap air fares is over?

Statistics NZ says the jump in prices is mainly because of rising fuel surcharges and higher fares during what is the peak season for air travel.

Echoing this, Deutsche Bank's chief economist Ulf Schoefisch predicts that seasonal trends will see international air fares drop back in the present quarter.

It's certainly true that for some years air fares have tended to rise pre-Christmas and then fall back when demand slackens in the New Year.

But that doesn't alter the fact that after falling steadily for about 18 months Statistics NZ's international air fares index appears to be climbing again.

At the end of June the index was at the lowest point in its 20 year history, 815, nearly 30 per cent lower than in 1985.

But since then it has climbed to 863 and now 950, a rise of 17 per cent in six months, and is now at its highest point in nearly two years.

A similar pattern has been recorded by the American Express Air Fares Index which rose for the fourth consecutive quarter.

Robert Tedesco, head of consulting services for Amex in the Asia-Pacific region, says the main driver for the increases is the rise in oil prices. "Many airlines in the region have announced temporary fuel surcharges in recent months," he says, "while some have incorporated higher fuel costs into their airfares."

Unfortunately, the actual level of price rises is probably even higher than the Statistics NZ and Amex indexes indicate because Amex doesn't count those fuel surcharges and both exclude the increasingly outrageous airport charges which now form a significant part of most overseas air travel costs (and which our Government is poised to increase further).

Worse still, Amex is predicting that airfares, both globally and in the Asia-Pacific region in particular, will continue to rise in the next 12 months.

But there is one bright spot in all this for the holidaymaker.

Amex's Tedesco also draws attention to a different pattern between business-type fares, which have tended to rise more quickly, and leisure-style fares, which have not been affected so much.

For instance, across the Asia-Pacific region, business class and full economy fares both rose 1.3 per cent during the final quarter of last year while the discount economy index went up by a more modest 0.4 per cent.

That pattern was even more marked when it came to New Zealand, where the index recorded rises of 1.5 per cent and 0.4 per cent for business and full economy fares during the quarter, while discount economy fares fell a significant 3.5 per cent.

Again, Amex expects that pattern to continue in the next 12 months. Its latest global forecast is for domestic and short-haul economy fares to rise by 0-3 per cent but international business fares by 2-5 per cent.

That rather indicates that those who have to travel to a fairly inflexible schedule - typically business travel - face continuing price rises.

But those who can afford to pick and choose a little should still be able to find bargains.

That view is supported by the country's largest travel retailer, Flight Centre, which says it is noticing "a higher incidence of discounting to most destinations and particularly Asia/Pacific, though some of this has been offset by the increase in fuel surcharges".

Communications manager John McGuinness says whatever the pattern in standard fares "we've not noticed an overall increase ... if anything we just see more and more frequent discounting".

Because of that, he says, "These days people can anticipate a deal. If you've got a bit of flexibility you shouldn't need to pay the standard fare. Chances are a special will come along."

In other words, if you're planning an overseas trip, don't accept the first fare that comes along ... it may be worth your while to shop around.