Airfares set to moderate in economy cabin at least, CEOs say

After more than a year of eye-watering airfares post-Covid, there’s some good news for fliers this summer, at least for those traveling in economy — prices aren’t expected to go any higher and in fact may moderate.

That was the assessment of many airline chief executives gathered in Dubai this week for IATA’s annual meeting. Several singled out the UK as one place where demand is looking particularly weak.

Upcoming elections around Europe may also be suppressing people’s desire to spend on travel, they said, as economic uncertainties weigh on consumer sentiment.

“In the UK, specifically in economy class, we’re seeing a bit less robust demand but a strong summer overall,” Virgin Atlantic Airways Ltd. Chief Executive Officer Shai Weiss said. “That tells us there’s a bifurcation of prospects for individuals.”

Ryanair Holdings Plc’s Michael O’Leary was one of the first to sound the alarm about softer fares last month, predicting they’d hold steady into summer even with aircraft in short supply, challenging the accepted wisdom that a lack of supply always means higher prices. 

United Airlines Holdings Inc. CEO Scott Kirby on Monday described the picture right now as “steady as she goes” with demand holding but not increasing, while Emirates President Tim Clark said despite strong demand going into summer, prices are “very much at an equilibrium.”

IATA Director General Willie Walsh said the chance of political change in Europe was one reason people may be less inclined to travel. The UK goes to the polls on July 4 and the European Parliament holds its elections in the coming days. 

“With economy class fares I’ve heard a number of CEOs say pricing is a bit softer, particularly in the leisure market,” said Walsh. “It’s interesting, when I think back to my time as a CEO, this was often influenced by elections.” Walsh oversaw the merger of British Airways and Iberia that formed IAG in 2011.

Data from aviation consultancy Cirium backs up the trend, with European domestic fares steady since last summer. Transatlantic fares have fallen as more carriers have entered the lucrative market.

Cirium said that as more capacity comes back, fares will likely fall. 

“Airlines work so closely in understanding how everyone else is charging on the route, almost on an hourly basis,” Cirium CEO Jeremy Bowen said. “With increased capacity, if an airline opens up on a route it will probably deflate prices.”

One cabin that isn’t expected to enjoy more reasonable fares — business class. According to Amex GBT, prices will continue to rise, with aircraft production constraints one factor.

Amex GBT expects New York to Los Angeles business class fares could increase by 8.5% over the summer period, or May to August inclusive, versus 2023, while London to New York business class fares may rise by 11.5% factoring in the summer travel spike and possible “halo effect” from the Paris Olympics.