The era of the absurdly cheap domestic airline ticket appears to be over at least in Australia. Signs have emerged that Qantas, Virgin Blue and Jetstar have had one of their best Christmas periods and that airfares could be back on the rise.
There are expectations the airline [Virgin Blue Australia], which has struggled to respond to intense competition from Jetstar and high fuel prices, will forecast a rebound in profits. The airline reported a 33.8 per cent dive in profits last financial year. Virgin Blue is expected to make a $218.4 million full-year profit in 2007-08, a number most brokers predicted the airline would make before its post-float troubles.
Some sharemarket analysts have upgraded their forecasts for Virgin Blue based on expectations of higher average ticket prices. "The market has certainly settled down. The competition is more rational than what you saw last year," Commsec's aviation analyst, Matt Crowe, said. 
Nearly two years after Virgin Blue and the newly-launched Qantas budget offshoot, Jetstar, dumped 300,000 one-way fares at AU$29 on the domestic market, the airlines are showing little sign that consumers will encounter a similar barrage of cheap tickets.
photo from jetstar.com.au
In stark contrast to its statement to do "whatever it takes to remain Australia's low-fare leader" two years ago, Virgin Blue offered a more pragmatic approach yesterday.
"Never lose focus on yield; that's just a constant in our business. However, we have sales from time to time if we think we have to stimulate short-term [demand]," a Virgin Blue spokeswoman, Heather Jeffery, said.
The latest data from the Bureau of Transport Economics (Australia) shows economy air fares are slightly up from a year ago, while the percentage of seats filled on Virgin Blue and Jetstar flights has risen.
Jetstar was equally coy on whether it planned to dump hundreds of thousands of tickets on the market. It, too, appears to have had a good Christmas.
"We think our operations have bedded down well. We had a very sound December and a very sound January," a Jetstar spokesman, Simon Westaway, said.
A quick survey of tickets within Australia resulted in:
Round Trip from Sydney to Cairns leaving March 1 returning March 7:
Virgin Blue: AU$320 (US$240)
Qantas: AU$390 (US$292)
Jetstar: AU$259 (US$194)
Just for comparison, that's about the same distance between Washington D.C. and Dallas/Fort Worth. Could you get a round trip ticket from D.C. to DFW for 300 dollars or less?
However, this could all be coming to an end. And why does this affect America? It shows that domestic fares across the world are rising. This also shows that once multiple low cost carriers are established fares will begin to increase. Jetstar has only been around for less than a few years. Virgin Blue under 6 years old. This also shows that even 'legacy' carriers can survive the crunch of LCCs. They just have to be agressive and understand the passengers needs.
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