Airlines Have Finally Hit a Ceiling on Fares

The bottled-up post-lockdown wanderlust may have run out of destinations.

On Monday Ryanair, Europe’s biggest airline said its profits took a 46% nosedive in the most recent quarter, and in response it would have to offer “materially lower” airfares for the busy summer period to attract more fliers. It’s the biggest indicator so far that consumers who were previously willing to bite the financial bullet and buy plane tickets have finally lost their zeal for travel.

Wanderlackluster

Once countries started to lift their COVID-19 restrictions, the airline industry received a predictable rush of demand, which allowed it to drive up airfare. That demand remained steady even as high inflation and cost-of-living crises battered household budgets — the yearning for vacation was that robust. 

That voracious consumer confidence started to show the first signs of wobbling a few months ago, however, and for European airlines, Ryanair’s announcement is already having a serious domino effect:

• Ryanair’s share price fell 15% on Monday, and rival airlines also saw dents. EasyJet’s shares fell 8%, and British Airways owner IAG slid 3%.
• If Ryanair lowers its prices for summer airfares, that will put pressure on other airlines to lower their own prices and thereby stay competitive.

Although fliers are being more discerning on cost, Ryanair said it actually saw passenger numbers rise 10% year-over-year in the last quarter. So people still want to hop on a plane: They just have their limits on price. Reuters reported on Monday that in the US as well, airlines have been forced to offer discounts in order to fill up their planes. 

Blue-Screen Blues: Last week’s record-breakingly huge IT outage is continuing to wreak havoc at some airlines. Delta, which accounted for the vast majority of cancellations caused by Friday’s blue-screen plague, announced on Monday it was canceling another 600 flights, equal to 16% of its flights overall.