Airlines may be forced to increase passenger fares dramatically once foreign travel is allowed again, experts have warned.
With many countries banning international flights to try to stem the spread of coronavirus, airlines have been hit particularly hard by the crisis. Many of them have cut staff, reduced fares and cancelled many flights altogether.
As a result, analysts fear that in an effort to recoup some of their losses – and to cancel out lower plane capacity caused by social distancing rules – prices could skyrocket once travel restrictions are lifted.
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What’s happening to the airline industry?
With widespread restrictions placed on long-distance travel, the economic impact of the Covid-19 crisis on airline revenues has been dramatic.
Conde Nast Traveler reports that airlines collectively have been losing around $1.6bn (£1.27bn) per day, while the International Air Transport Association (IATA) has suggested that airline revenue could fall by at least $250bn (£199bn) this year, warning of 25 million jobs being put at risk in the aviation sector alone.
Furthermore, the body estimates that airlines might have to repay $35bn (£28bn) in the next three months in refunds, says the Financial Times.
Alexandre de Juniac, the head of IATA, said last month that “the air transport industry is in its deepest crisis ever”.
“A liquidity crisis is coming at full speed,” he said. “Revenues have fallen off a cliff.”
What will happen once the lockdown ends?
In the UK, the government advised citizens “against all non-essential international travel” from 17 March. This was initially due to last for a period of 30 days but seems likely to be extended as the country continues to battle the virus.
Neil Ferguson, a government adviser and professor of mathematical biology at Imperial College London, said that the UK will likely not be able to relax its stringent lockdown rules until the end of May, Al Jazeera reports.
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However, The Telegraph cites an industry source who claims that even when non-essential foreign travel is allowed again, airlines are “likely to be barred from fully filling planes” in order to “ensure passengers keep a safe distance from each other while onboard”.
As a result of only being able to sell half of the seats on any given plane, the paper says “air fares would need to at least double to maintain pre-coronavirus profit margins”.
The anonymous source told the paper: “After lockdown there will be a mad rush and a price surge for airline fares. It would be no surprise to see social distancing on planes, and we will probably see some set guidance on how planes should do this. There are currently cheap fares available, but this pricing is based on a full plane.
“The profit margin on a single seat is around £5 on average, so it is inevitable that ticket prices will have to go up to maintain this if only a proportion of seats are allowed to be sold,” the source added.
“Airlines may also want to recoup losses from this period where they have been largely unable to fly. These new, inflated prices could stay high for as long as social distancing [is in place].”
As the Telegraph adds: “A price hike combined with many workers being furloughed, accepting pay cuts or being made redundant could temporarily push foreign holidays out of reach for lower and middle income families”.
