coronavirus will force airlines to raise prices

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coronavirus will force airlines to raise prices





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The ‘low cost’ model in the airlines, based on offering attractive prices to fill the aircraft and charge for additional services to the ticket such as the carry-on suitcase, could come to an end with the coronavirus. The European Commission has not yet stated what the protocols will be to follow when the aircraft resume activity to avoid contagion on trips, but the measures that sound louder go through leaving part of the seats empty to keep safety distances and / or ban on-board luggage, two key aspects of the low cost business that would entail price rises.

In fact, Emirates it has already banned all cabin carry-on items beyond bags, briefcases, or electronic equipment. To counteract this ‘damage’ to the passenger, it has decided to extend the weight limit of checked luggage. For its part, the British EasyJet and the Americans Delta and American Airlines have stated that they study the way of remove center seats. Some measures that Brussels could extend to all trips within the European Union, which the Commissioner for the Internal Market and Industry, Thierry Breton, hopes that they can be resumed progressively “from this summer”.

Knowing the problems that the decrease in capacity on their flights would entail in their business, the CEO of Ryanair, Michael O’Leary, He affirms in an interview with ‘Financial Times’ that if distancing measures are imposed such as leaving an empty seat, which he considers “absurd”, his airline “will not fly.” The executive assures that he has warned the Irish Government that “the State will have to bear the cost of leaving those rows empty”Well, “we cannot earn money with 66% occupancy”.

Alexandre de Juniac, the director general of the world aviation association, the International Association of Air Transport (IATA), states that if the European Commission requires in its regulations – which it is expected to announce next month – to leave at least one third of the seats free, the ‘low cost’ tickets in the short and medium radius “will end”, because the airlines will be forced to increase their rates by 50% for “ensure a minimum profit” especially low-cost companies, with tighter margins per seat than traditional ones.

Very similar prices

In this way, the characteristic feature of the ‘low cost’, the low cost, will be blurred with the coronavirus. According to data from the tourist intelligence platform Mabrian Technologies, right now fares for short flights in the summer months are already very equal between the different companies, since traditional airlines have been able to lower prices to boost summer sales while the ‘low cost’ has remained stable in some cases and in others it has become more expensive.

For example, according to the firm’s data, for the first half of July, the price of flights for both traditional and low-cost airlines is around 90 euros on flights from SpainBecause the former -thanks to that higher margin they have- have reduced fares by 41% compared to the same period last year to fuel demand, while low-cost fares have increased the average ticket price by 37 % for said period on flights.

In the online search engines it can also be verified that during these dates some traditional airlines such as Air Europa or Iberia already equal in price to Ryanair, Norwegian or Vueling on internal short-haul flights, such as the Balearic or Canary Islands, or even to destinations in other nearby countries, such as Porto or London. A variation that, according to experts, had already been experimented months ago, with increasingly hybrid models in general terms, and could be promoted in the future. Without the ‘full capacity’, the ‘low cost’ they will lose the competitive advantage of the price and they will have to ‘fight’ for the clients.

With the fall in demand as the main scenario, the CEO of IATA points out that this increase in rates is presented as the only solution for dodge bankruptcy. Some low-cost airlines were already experiencing financial problems before the health crisis that have now worsened, such as Norwegian. It has recently closed four subsidiaries in Europe and the Sepla pilots union doubts its future in Spain. From the airline they assure this medium that their situation in our country “remains the same at the mercy of events.”

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