Flights, tickets 50% more expensive even if the cost of fuel has dropped by 45%: what’s happening? – Corriere.it

The CEO of one of the world’s leading airlines is almost ashamed to admit it. In this period we are earning incredible figures, without exception, and with tariffs at historic highs, he says during an informal chat with the Courier. People are paying any price – he continues – and we still can’t figure out when they will stop doing it, but sooner or later it will happen. The manager then shows a document on his tablet with the estimated revenues of all carriers in the week of June 12-18: 12.3 billion euros, over 1.2 million per minute. Let’s remember, however, that we come from maxi-losses due to the pandemic and kerosene costs us a lot, he specifies.

The comparison

Taking a plane this year is a drain. But as travelers find themselves paying more and more than in 2022, in parallel the price of jet fuel has dropped significantly. In the first six months of this year, the fares for flights from Italy — domestic and to Europe — rose by 47.5%, with June closing with +52%, according to the analysis that the Courier carried out on the specialized platforms and in relation to all the traditional and low-cost airlines operating in our country. Kerosene instead dropped by 22%, in the same period of time, with peaks of -40 and -45% between April and the month just ended.

In the middle of summer

No truce is expected in the coming weeks. Preliminary data for July show a 50% increase in tariffs compared to the same month in 2022, August prices mark +50.4% and September ones +39%. All net of ancillary costs such as priority boarding, choice of seat, hold baggage. Price increases that do not discourage travellers. In May – the last month recorded – almost 18 million people passed through Italian airports, +4.1% compared to the pre-Covid period, calculates Assaeroporti. In the first five months of 2023, the progressive figure is just 0.8% lower than in 2019. Iata, the international association of carriers, forecasts a return in pre-pandemic volumes for 2023 with 4.35 billion travellers. But the profits for each traveler embarked will amount to just over 2 euros.

The criticisms

The price increases at high altitudes also make many insiders turn up their noses. Who ask the authorities – European and local – to investigate. In Europe flight prices are skyrocketing, confirm by phone at Courier Olivier Jankovec, director general of Airports Council International Europe, the association that brings together around 600 airports on our continent. This increase leaves me perplexed, I am surprised that no one is intervening to protect the public interest, he attacks. And for this he proposes ticket monitoring: it is clear that there is an increase that goes beyond the costs incurred by the carriers, the fares are 6 times the inflation rate, how is that possible?.

The tracking

Jankovec reminds that tariff monitoring is not a new thing. The authorities in the US and Australia have been doing it for some time, why isn’t it happening in Europe too? In theory, the Directorate General for Transport of the European Commission or, at a national level, entities such as the Antitrust or civil aviation bodies should deal with it. We airports are always under the scrutiny of national regulators on the rates we can apply – he underlines -, but this does not happen for airlines. Our tariffs have risen by 7% compared to 2019, but if we take inflation into account, it means that in real terms they have dropped.

Vector replication

Airlines for Europe, an association that brings together the main airlines such as Lufthansa, Ryanair, easyJet, Air France-KLM, British Airways and Iberia, replies that competition between carriers has contributed to keeping fares low and has allowed millions of Europeans to travel at convenient numbers. Several airlines contacted these days explain that the fuel used today is that purchased a year ago, so today’s rates do not yet reflect the drop in the price of kerosene. And they add that there are also other expenditure items to consider, such as salaries, which have increased in recent months. And then, in the face of high demand, the supply has not yet returned to that of 2019: according to Iba data, the third quarter – from July to September – in Europe still marks -6.3% compared to four years ago.

The node of the algorithm

Given that the rule of supply and demand applies, it must be said that travelers in this period seem willing to spend more, so much so that many book in Business class, comments Pierluigi Di Palma, president of the National Agency for civil aviation (ENAC) which has always been very attentive to consumer requests. Carriers are trying to recover the losses incurred during the pandemic as soon as possible, he adds. According to the president, the rates are indeed high, but he points the finger at the algorithm at the base of the airlines’ revenue management systems: On the one hand, we observe low starting prices, for those who book months in advance, but gradually as the departure approaches, the cost rises too much.

The role of inflation

We must be careful – warns Jankovec -: we are heading towards a structural consolidation of the European air market and it will also be difficult to increase the capacity of the airports: the carriers risk having ever greater market power. At least for the next 10-15 years, I don’t think there will be a drop in fares in Europe, said Willie Walsh, director general of Iata, the association that brings together airlines from all over the world, in early June. While Marie Owen Thomsen, Iata’s chief economist, points out that if we consider the inflation rate, the airfares of OECD countries in spring 2023 were in line, not higher, than those of 2019.

The proposal

What to do? The tariff range could be reduced, limiting the maximum tariff, but at the same time raising the minimum, Di Palma proposes. Who warns: As Enac we can do little except on issues concerning safety. Commercial practices in Europe are not regulated, an investigation must be opened for the suspicion of collusion between carriers for authorities such as the national or European Antitrust to intervene. But the cartel, says the president of the National Civil Aviation Authority, is very difficult to prove.

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