Tickets to tumble as airlines start price war
MILLIONS of travellers are set to benefit from lower airfares as industry competition and security concerns ratchet up a price war between Europe’s budget airlines.
It comes after low-cost carrier Ryanair blamed downward price pressure on Brexit uncertainty, a weaker pound, and the drop in demand for destinations like Turkey, Egypt and North Africa, all of which have made headlines for terrorist attacks in recent years.
Airlines are now pulling back from those regions to focus on the Western Mediterranean, Spain and Portugal, where competition is getting fierce. Analysts are now forecasting other carriers could follow suit and slash prices.
Robin Byde, a transport analyst at Cantor Fitzgerald, said: “There is too much capacity in the European short haul market and both Ryanair and easyjet have ambitious growth plans.
“Both have signalled weaker yields and are, in part, driving this discounting.”
Numis Securities analyst Wyn Ellis said the relative rate of capacity growth is “significantly higher” than underlying demand growth. Demand across Europe is growing between 4% to 5%, while capacity growth — most of which is concentrated in the Western Mediterranean — is rising by 6% to 7%.
Meanwhile, cheap fuel prices are enabling further price cuts.
“That’s the overall issue and it’s affecting all airlines in European short haul. Too much capacity chasing too little demand in a relatively low cost fuel environment,” Mr Ellis said.
Consumers will be shielded from further price hikes until capacity growth slows and oil prices rise.