After decades of falling airfares, the cost of flying has skyrocketed. In fact, aviation analytics firm Cirium recently estimated that prices were up 32% over 2019, the industry’s pre-Covid benchmark. While some may disagree with certain estimates, no one disputes that it happens – least of all the traveling public.
The reason is simple: too many people, too few aircraft. Capacity, basically the number of planes carrying people, has not yet returned to pre-pandemic levels, while the number of people traveling is at that benchmark, or at least very close to it. So, with supply lagging behind demand, the obvious has happened and fares are rising.
People want to fly because during the pandemic it was a “luxury” for the few, as most governments had imposed a ban. Now, the easing of restrictions has sparked a global “appetite” for air travel. Many industry analysts such as TravelMedia see growth as incredible, with no signs of fatigue on the horizon.
The phenomenon is more pronounced in some generations than others, as those 70 and older believe that if there is another pandemic, they may not have the opportunity to travel again, so they jump at the chance. And money doesn’t seem to be a problem. It is often seen that first class and business class seats sell out before economy class tickets, signaling that high prices are not a deterrent.
Traffic has recovered
Globally, the International Air Transport Association (IATA) said traffic in May had reached 96.1% of the same month in 2019. Global airlines could make a profit of 8.8 billion. euros ($9.8 billion) this year, a figure that – as IATA claims – amounts to just $2.25 for each passenger.
Demand shows no signs of slowing down. Ed Bastian, chief executive of Delta Air Lines, recently told analysts that “the consumer is in good shape financially.”
Delta, which also serves Greece from three US cities, expects strong demand to continue and extend beyond the traditional Northern Hemisphere holiday season in many markets. At the same time EasyJet reports strong third quarter results due to summer travel demand.
But as the IATA figures suggest, this recovery is not uniform. Some parts of the world continue to lag behind, and there are also local trends.
Europe under pressure
Europe is under particular pressure. A weaker euro against the dollar is likely to attract more American tourists across the Atlantic. Similarly, China’s “resurgence” from its latest lockdown is likely to draw travelers.
But Europe’s skies are saturated. The war in Ukraine has closed a significant part of the airspace, while elsewhere there are problems with air traffic control. Those restrictions, along with a stated desire to avoid last year’s chaos, have prompted many major European carriers, including Air France KLM and Lufthansa, to cut capacity. The economic problems that preceded Covid mean that others simply haven’t recovered.
Airlines such as Air France and Lufthansa are keeping supply well below pre-pandemic levels to ensure they can operate flights as normal.
Another factor that has pushed carriers to limit their supply may be the shortage of pilots and crews. Bastian highlighted “shortfalls in pilot training” as a problem for US airlines when he spoke to industry analysts last week.
The impact of all these trends may not be immediately apparent to anyone making reservations, as many airlines have restored routes but reduced frequencies, so there aren’t as many flights as there used to be. That’s why the plane tickets went up so much.
Lack of aircraft
Irish giant Ryanair is one of the few to increase capacity as it is set to take delivery of around 50 new aircraft this year. It expects modest fare increases in the current fiscal year, which began on April 1, following a 10% price hike. The other Irish carrier Aer Lingus has restored its capacity to 2019 levels, noting that its charges are the same as in 2022. However, it points out that inflation has increased costs over the past four years.
Elsewhere, only Eastern European low-fare carrier Wizz and state-owned Turkish Airlines have increased the number of planes in their fleets. All others have reduced their capacity compared to 2019, by around 20% in many cases. There are therefore 4% fewer seats available on European airlines compared to 2019.
Manufacturers don’t make enough planes
Even if airlines were to increase capacity, manufacturers are not making enough planes. The lockdowns have exacerbated existing delays in aircraft production. The entire supply chain is under pressure.
In 2018 the industry estimated it would need 20% more aircraft by 2023. Manufacturers have added 3%, but other constraints have virtually wiped out even that gain. The shortfall is now 2,750 planes, i.e. 13 – 14% of the global fleet.
Current efforts to increase production will simply return the industry to 2019 levels, so that the gap between supply and demand will remain, possibly until the end of the decade.
Ryanair chief executive Michael O’Leary has often criticized Boeing for delaying deliveries, although the airline did not expect any shortfall in the 50 or so aircraft it was due to take delivery of this year to affect summer routes.
Bastian also told investors that both Boeing and Airbus continued to experience delays in aircraft deliveries. Overall, he said the “significant gap” between supply and demand will remain for a “long time.” In fact, few in the industry see current trends reversing any time soon, stressing that cheap tickets are gone forever.
Demand remains high
With supply squeezed, fares are only likely to fall if consumers stop flying, perhaps now because of financial crunch, but that doesn’t seem to be happening yet, despite recession and inflation
So, the only option left for travelers is to try to get the best possible price. Early booking seems to be the surest way to do this. Airlines advise that if you can be flexible about when you fly, this could also work to consumers’ advantage. It should be noted that weekends and Mondays are always the most expensive itineraries.
Researching various online and travel apps for deals is especially helpful if you’re flexible about when and how you get to your destination.
However you do it, the days of ultra-cheap flights seem to be gone – for now at least – and with them gone the last-minute discounts.
Source: Ot.gr
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