Airfares in Europe surpassed inflation by about 15% in early 2024, and high prices are set to continue, says ING, a Dutch financial institution.
ING attributes the inflated airfare prices to increased demand, aircraft availability constraints, higher jet fuel prices, taxes and climate policies.
“Global airline demand has outpaced fleet capacity development, which puts growth plans for airlines under strain,” says ING.
Multiple supply chain issues, limited aircraft availability, and delivery delays have resulted in reduced capacity.
Iata’s analysis in March 2024 showed that the global market’s passenger load factor (PLF) was at 80,8% while Europe’s was at 78,6%. Compared with March 2019, global PLF was at 82,1% while Europe was at 83,9%. ING says that although Europe’s airlines have not fully recovered their passenger loads, the increased demand is concentrated within a smaller network.
Over and above lengthier routes, several European countries charge higher ticket taxes and require adherence to environmental policies, including investing in carbon offsetting and SAF, which contributes to higher airfare prices. ING found that SAF was going for about 2,7 times the price of conventional jet fuel.
“We don’t expect that the cost of SAF will drop to jet fuel levels anytime soon, which means a targeted blend rate of 10% in 2030 being aimed for by airline coalitions Oneworld group and Clean Skies for Tomorrow eventually adds 3-4% to ticket prices,” says ING.
According to ING, travellers are willing to pay more for carbon offsetting, but significant ticket taxes are dampening demand for low-cost carriers (LCCs).
For example, Ryanair announced its plans to serve 200 million instead of 205 million passengers in 2024. The LCC’s CEO, Michael O’Leary, told the Financial Times that its fares across its network would remain flat or modestly above last year, with O’Leary fearing consumers’ willingness to pay more has hit its limit.
Additionally, Lufthansa and KLM revised available seat capacity downward for 2024 due to Germany’s severe hike in taxes for long-haul flights.
