Tick­ets to tum­ble as air­lines start price war

Belfast Telegraph - Business Telegraph - - Platform - BY KALYEENA MAKORTOFF

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.

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