“Flying will cost more and more, but it’s not the end of the low-cost model” – Corriere.it

Flying will cost more and more in Europe, in particular as a result of EU policies which require air transport to reach 2050 with net zero emissions. “At least for the next 10-15 years, I don’t think there will be a drop in tariffs on the continent,” he says Courier Willie Walsh, director general of Iata, while he replies to some journalists on the sidelines of the assembly of airlines that took place in Istanbul. Walsh – former number one of Iag, holding company of British Airways, Iberia, Vueling and Aer Lingus – thus confirms what has been written in recent weeks. But he doesn’t think this marks the end of the low-cost model. On the contrary.

What summer awaits us?
«A decidedly crowded season, the flights are all expected to be full».

In 2022, the holidays of millions of people were ruined by some completely blocked airports, lost luggage, canceled or severely delayed flights. And this year?
«Companies and airports shouldn’t have the problems of the past year, they are prepared. What worries us is air traffic management, starting with that in France. In general, however, I expect a “normal” summer, in line with that of 2019».

Has the sector done its job?
“She’s clearly learned from her mistakes and woes: Most have prepared for the peak.”

This year there is a lot of talk about the increase in ticket prices…
«Honestly, the data tell another reality: the rates are at the levels of 2019. We have analyzed 800 million bookings: the first quarter of 2023 and the same period four years ago in real terms show no differences. Today, kerosene costs more and this inevitably affects tariffs. Then there is inflation, as well as demand which is greater than supply. Not to mention the problems in the supply chain which is delaying the delivery of new aircraft or maintenance».

What impact will the European policies for the reduction and then the zeroing of emissions have?
“It will lead to higher ticket prices. Sustainable aviation fuel (Saf, ed) is much more expensive than kerosene, and consumers will pay for this transition».

Does it mean that the cost of tickets will never go down?
“I think so. At least in the next 10-15 years. This is because companies in Europe will have to use more and more Saf and therefore will have higher operating expenses. And at the moment I don’t see a drop in other expense items that can compensate for the increase in the cost of fuel».

Will this put the low cost business model in difficulty?
“I do not believe. It will impact every type of company and therefore the rates will be higher for everyone.”

Are you confirming what has been argued for some time and that is that we will no longer see rates at 4.99 or 9.99 euros?
“That’s right. With all the costs that the airlines will have to bear, it will not be possible to have such low fares. Ryanair CEO Michael O’Leary also said so. But I repeat: the low cost airlines will stay and expand».

So should we change the definition of «low cost»?
“No. Ryanair is certainly a low cost airline, other carriers only have low labor costs. O’Leary’s business model works.”

Can we say that the minimum fare is now 25 euros per way?
“I can’t give a number. There will certainly be opportunities for passengers, but fares in general need to reflect rising operating costs.”

So I rephrase it: isn’t it the end of low cost as a business model but is it the end of low fares?
“But what is a low rate? Years ago we would have said that 100 euros was very convenient, today it is not in the common perception».

Will the more expensive flights affect traffic volumes?
«The increase in costs will have an impact on demand, it is undeniable, particularly in that segment of travelers who are very sensitive to price».

But if low cost airlines will no longer be able to guarantee flights for 9.99 euros, where will the convenience be compared to a traditional carrier?
«This should be asked of the individual carriers. But the low-cost model is by no means finished. And O’Leary will definitely be around for at least another ten years.”

Subscribe to the newsletter of The Economy

Whatever it Takes by Federico Fubini

The challenges for the economy and markets in an unstable world

Europe Matters by Francesca Basso and Viviana Mazza

Europe, the United States and Italy that count, with innovations and important decisions, but also small important stories

One More Thing by Massimo Sideri

From the world of science and technological innovation the news that changes our lives (more than we think)

And don’t forget the newsletters
The Economy Opinions and the Economy 6 pm