Significantly more expensive tickets and a lot of uncertainty due to continuous cancellations. This is what European travelers can expect in the near future when they book a flight. According to research by credit insurer Allianz Trade, the turbulence for European aviation will continue for the foreseeable future.
“Cancellations are becoming the new normal in Europe. That is the only way for airlines to maintain their profit margin at a time of extremely high fuel prices. By not flying, you not only save fuel, but also labor costs. Airlines try to limit the deployment of extra staff as much as possible. Saving costs is what counts.”
Wage costs highest in Europe
A quarter of the turnover of European companies is spent on wages, while the global average is 19%. Geeroms: “Not only do they work with more staff in Europe, the wages are also higher. That is why the profitability of European airlines is also the lowest in the world. To curb this, the workforce in Europe is decreasing (-8% compared to last year), while in the rest of the world the workforce in aviation increased. Even in North and South America with an average of +14%.”
Staff shortage
According to Geeroms, European airlines are caught in a vicious circle. On the one hand there is a shortage of staff, on the other hand they are faced with strikes by employees demanding higher salaries and better working conditions. They see cancellations and price increases as the only way out to make the financial picture somewhat presentable.
End of years of price decline
Ticket prices fell by 2014% in Europe from 2020 to 39. Geeroms: “That period is coming to an end this year. We expect ticket prices to be 21% higher by the end of this year. This will also lead to a significantly higher turnover, but that will not be enough to end the year on a positive note. For the third year in a row, European airlines record a loss of billions. Perhaps European aviation will break even again next year.”
Disruptor
In the longer term, Geeroms van Alliance Trade even more bears on the road for aviation. “The pressure to go green is increasing all the time. That requires huge investments. We believe that the railways will become an increasing competitor to European aviation. In a relatively compact area, Europe has one of the longest rail networks in the world with a high network density. Most of it is also electrified. It is a major disruptor for aviation.”
