In part, the higher fares are driven by a lack of capacity, with supply chain issues hitting aircraft deliveries and maintenance. But the total costs of travel, including hotels, are also rising and anyone betting that passengers have become immune to price might be taking a pretty big risk.
Predicting how consumers will behave has become a lot more complicated post-pandemic, say aviation planners. Past forecasts have been able to exploit decades of data detailing the so-called price elasticity of demand – in essence, the connection between the level of airfares, wider economic conditions and propensity to travel, according to one forecaster.
But “those assumptions were based on a market that evolved in one direction, which has been that tickets were getting steadily cheaper,” he says. That is no longer the case.
“What happens when [COVID-19] savings are gone, and if unemployment is higher? No one knows,” says Rob Morris, head of global consultancy at Ascend by Cirium.
SQUEEZING IN EVEN MORE REVENUE
Moreover, some airlines have taken advantage of the post-COVID mismatch in supply and demand to squeeze even more revenue from passengers while offering less, making the true cost of flying less transparent and increasing the hassle of travel. No longer is a cabin bag included in the basic fare of many airlines – whether low-cost or legacy carriers.
And if you don’t pay for seat allocation, you may find your companion sitting at the far end of the aircraft – even if you are surrounded by empty seats, as I was on a recent trip to Dublin.
This so-called drip pricing, used in many leisure industries, is now under government scrutiny in the United Kingdom. If the government feels compelled to act, it is surely a sign that consumers are reaching their limits.
