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6401.0 - Consumer Price Index, Australia, Mar 2002  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 24/04/2002   
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TREATMENT OF RECENT CHANGES AFFECTING THE AIRLINE INDUSTRY


INTRODUCTION

The Australian CPI is constructed using the acquisitions approach, which means the prices used are those that would have been paid for goods and services acquired during the quarter. For the majority of items included in the CPI, obtaining these acquisition prices is relatively straightforward. However, obtaining acquisition prices is more complex for items such as holiday travel and accommodation, for which advance booking and payment are common.

The procedure followed in the Australian CPI is designed to approximate the purchasing behaviour of households. In the case of airfares, it is common for households to book and commit to purchase airfares well in advance of the date of travel (the date at which the service is acquired). Accordingly, the ABS has opted to include in the CPI the prices paid for airfares two months in advance of the month of travel (these prices are collected monthly). The month to which the prices are allocated in the CPI is the actual month of travel. For example, the prices included for the September month would be those collected in July for travel in September.

A number of recent changes to the airline industry in Australia have impacted on the airfares component of the Holiday travel and accommodation subgroup of the CPI. The treatment of these changes is as follows.


DOMESTIC AIRFARES

The collapse of Ansett in mid September 2001 meant that a number of domestic travellers were unable to use their advance-purchased tickets for Ansett flights. In order to travel, those Ansett customers would have had to purchase replacement tickets either at the special prices offered to Ansett customers by the other airlines or at prices not reflecting discounts for advance-purchased tickets.

In addition, the Federal Government introduced on 1 October 2001 a $10 Air Passenger Ticket Levy to fund Ansett workers entitlements and, on 5 October 2001, all domestic carriers introduced an Insurance Levy to cover the increased costs of airline insurance following the events of 11 September 2001. Both these levies apply to tickets purchased on or after the respective dates rather than to trips made on or after those dates. Existing charges such as the Sydney Airport Noise Levy were unaffected by these changes and continue to be included in the ticket prices.

These events were reflected in the airfares component of domestic holiday travel and accommodation in the December quarter 2001 CPI as follows:

  • for travel in October, a combination of prices of advance-purchased tickets bought in August and the special price tickets for Ansett ticket holders purchased in September following the collapse of Ansett, without either of the new levies included;
  • for travel in November, the prices of advance-purchased tickets bought in September, without either of the two levies included;
  • for travel in December, the prices of advance-purchased tickets bought in October, with the two levies included.

Prices in the March quarter 2002 have been compiled on a basis consistent with those for the December 2001 month.


INTERNATIONAL AIRFARES

International airfares were also subject to three new charges in the December quarter 2001. The Sydney Airports Corporation introduced, from 10 September 2001, a Passenger Service Charge on each international departure and arrival through Sydney airport. In addition, the Air Passenger Ticket Levy and the new Insurance Levy described above also apply to tickets purchased for international travel. Existing charges such as the Federal Government's Passenger Movement Charge, the Sydney Airport Noise Levy and a number of Safety and Security Charges applied at various airports were unaffected and continue to be included in the ticket prices.

The new charges were reflected in the airfares component of overseas holiday travel and accommodation as follows:
  • for travel in October, the prices of advance-purchased tickets bought in August, without any of the new levies included;
  • for travel in November, the prices of advance-purchased tickets bought in September, with the Sydney Airport Passenger Service Charge included but the Air Passenger Ticket Levy and the Insurance Levy excluded;
  • for travel in December, the prices of advance-purchased tickets bought in October, with all three new levies included.

Prices in the March quarter 2002 have been compiled on a basis consistent with those for the December 2001 month.


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