Ticket prices are up, inflation is eating away at purchasing power, but airlines serving Europe say they are filling up with summer bookings, letting the pandemic fade a bit more in the rearview mirror.
Some carriers have yet to rebuild their capacities, reduced during the health crisis, while Airbus and Boeing struggle to deliver new planes on time, which does not prevent customers from returning in even greater numbers than in 2022.
The law of supply and demand is doing its job and, in France, ticket prices rose 23.6% annually in the first quarter of 2023, according to statistics from the Ministry of Ecological Transition.
The explosion in the cost of hydrocarbons following Russia’s invasion of Ukraine underlies much of the phenomenon, with kerosene accounting for about 30% of carrier costs.
But other factors come into play, such as “a very strong increase in maintenance costs” linked to shortages of certain metals and disrupted supply chains, according to Marc Rochet, director of French companies Air Caraïbes and French Bee. He also mentions the repercussions of the salary increases granted in the sector.
However, “we do not see a weakening in demand,” testifies Johan Lundgren, although he acknowledges that customers “seek the best value for money.”
Budget “Sanctuary”
Much the same sentiment as Nicolas Henin, Transavia France’s deputy general manager in charge of sales and marketing: He hears “a lot of feedback” from customers noting the relatively high cost of tickets.
But “for the moment, we have not seen any impact on demand” although “it is something that we are looking at like milk on fire.” For him, “people reserve that budget and still want to travel.”
Transavia’s planes this summer to Greece, one of its star destinations, were 60% full in mid-April. With new destinations (Dakar, Yerevan, Paphos, etc.) and a fleet increased to 71 aircraft, the low-cost airline of the Air France-KLM group has seen its capacity increase by 65% in four years.
Other destinations experiencing a “very significant rebound”, those of the Maghreb: “people have not been able to return to the country to see their families for a while”, according to Nicolas Henin. Slot restrictions at Algerian airports have recently been lifted.
After having tended to book very late during the pandemic, when uncertainty reigned due to border closures, travelers, “more selective with prices”, are also gradually returning to their old behavior, for example taking out their tickets with five months in advance for long-haul flights. , according to Marc Rochet.
The Covid far behind
So much good news for an aviation sector that, after having gone through the nightmare of Covid-19, “is in very good shape, in full recovery”, according to Pascal Fabre, a specialist in this matter at AlixPartners.
In this context of rising prices, companies “for many achieved a higher turnover in 2022 than they had before the crisis, although capacity remains below it,” he pointed out during the meeting at a recent press lunch. These carriers “have” generated cash and started to deleverage.
This is the case of Air France-KLM, which announced on Wednesday night that it had “fully repaid” the aid granted by the French State in order to survive the health crisis.
A caveat to this optimism: the leaders of the aviation sector, scalded by the saturation of the airports last summer due to lack of personnel, now evoke the risk of a return to the saturation of the European skies during the high season, a chaos potential that they had a taste of in March because of the strike of French air traffic controllers.
Source: BFM TV
