STRONG demand from holidaymakers is expected to lead to a rise in air fares, helping the ailing airline industry recover from one of its worst downturns.
Travel agents reported a late surge in bookings in the lead-up to Christmas, as more confident consumers sought to exploit heavily discounted fares.
In response to the stronger demand, Qantas, Jetstar, and Singapore Airlines-owned Tiger Airways are bolstering capacity on key routes after slashing services in the economic downturn.
But with the extra flights not coming on stream for several months, airlines can use the summer period to claw back their margins by raising ticket prices.
The managing director of travel website Webjet, David Clarke, said ticket prices could rise by 10 per cent by April, on top of an increase of 7 per cent in recent months.
Qantas also this week indicated its yields - or average ticket prices - were rising as passenger numbers grew, underpinning a return to profitability in the first half of this financial year.
Despite the rise, yields remain well below those of a year ago, after the global recession slashed air travel.
''What we're seeing is the airlines pushing for yield in the holiday period,'' Mr Clarke said. ''If consumers are expecting those sorts of [deeply discounted] levels to re-emerge over January-February, I don't think there is any likelihood of that.''
The main driver of the recovery has come from stronger domestic air traffic, which was 8 per cent higher in November than a year ago from Sydney Airport, according to figures from its owner, Macquarie Airports.
But in international and premium travel, airlines face a challenging outlook. Qantas' international passenger numbers last month were 22.6 per cent lower than last year, and yields remained under pressure from competition on the Pacific route.
Ben Caplan, managing director of business travel agency Wall Street Travel, said turnover was 35 per cent higher than this time last year, but the increase came from a low base.
Corporate travel hit its heyday in late 2007, but Mr Caplan said the global financial crisis last year drove bookings to their lowest in 16 years.
''If the trend continues, things will be improved, but we are not going back to 2007,'' he said.
The chief executive of travel website Wotif.com, Robbie Cook, said corporate use of the website had increased from about 15 per cent of users last year to about 25 per cent now.
Growth in international travel was also being driven by more budget-conscious shoppers, with discounted flights to South-East Asia proving popular.
Flight Centre's general manager of marketing, Colin Bowman, said he was ''cautiously optimistic'' that demand would stay up.
Qantas group executive for government and corporate affairs, David Epstein, also said things were looking up, but he was reluctant to confirm that the worst was over.
