European Air Fares Rising Slower Than Inflation

New data from IATA indicates that travellers in Europe are benefiting from airfares that are undercutting inflation, as the market continues its post-COVID recovery.

The latest traffic figures show that European carriers sit just 3.6% down on the 2019 peak. Europeans are travelling despite the inflationary environment: In June, average air fares in Europe were around 16% higher than pre-pandemic. However, that is lagging the average consumer prices index for the EU, which in June stood at 20% over pre-pandemic.

Willie Walsh, IATA’s Director General, said that: “European air travel is continuing to recover strongly and is on track to exceed the 2019 benchmark in 2024. The competitiveness of Europe’s air transport market is holding air fare inflation at 16% — four percentage points below the rises that we have seen in the broad consumer price index. Considering the extreme volatility of jet fuel prices and increases in workforce salaries this is a significant achievement and stands in contrast to the continually increasing charges being pushed by our infrastructure suppliers.”

Recently the UK CAA approved an increase of 56% to London Heathrow’s charges, and an increase of 26% for NATS, the UK’s air navigation services provider, despite its service failure this summer. Meanwhile in the Netherlands, Amsterdam’s Schiphol airport, which has also suffered service failures, has been granted an increase of 37%.

Regulators play a crucial role in generating the conditions under which airline competition has been able to thrive. European regulators can take credit for ensuring a light-touch consumer regulation which has enabled airlines to create tremendous consumer choice and flexibility by unbundling the travel package. And the European slot regulation has created a balance between consistent schedules while increasing accessibility for new entrant airlines.

It’s equally important for regulators to recognize where they could enhance competitive conditions.

Two key areas are:

• Stronger regulation of monopoly infrastructure providers, to bring charges down.
• Reform of consumer protection regulation EU261, to ensure more consistent application of its aims, and a fairer sharing of accountability across the aviation value chain.

Walsh observed: “The recovery of Europe’s air transport market is bringing with it even more competitive market conditions. Consumers will see that with more routes and more airlines to choose from. In total, last year saw 20 new airlines born in Europe. This is important because a more competitive air transport market will make Europe a more competitive place to do business.”

The data was released at the Wings of Change Europe (WOCE) event, held this week in Amsterdam, the Netherlands, with KLM as lead sponsor.

GO to www.iata.org for more.