EU pressures airlines over soaring fares

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Brussels is probing the recent rise in air fares across Europe after airlines pushed up prices by as much as 30 per cent over the summer, leading to bumper profits.

Adina Vălean, the EU’s transport commissioner, told the Financial Times that EU officials were “looking into detail . . . of what is exactly going on in the market and why”.

The European Commission does not have the power to regulate air fares, but Vălean’s intervention adds to pressure on airlines over the recent price rises, triggered by a travel boom and supply chain issues. She said she was seeking explanations from airlines about the rise in fares and the potential barriers to connectivity in the bloc.

Average air fares across Europe were between 20-30 per cent higher over summer 2023 compared with 2019, according to EU data released in October in response to a question in the European parliament.

Vălean said she had no plans to intervene in the “functioning” aviation market but the commission needed more details of the industry dynamics that had led to the higher prices.

“We are still investigating because we don’t have a full, detailed explanation,” she said, particularly on whether the fare rises were a long-term trend.

Brussels is concerned that high air fares could affect the EU’s outer regions, such as islands or isolated territories that rely on aviation for connections with the rest of the bloc.

“We cannot go as a regulator into micromanagement of prices or imposing that, I don’t think this is doable or desirable,” Vălean said. “On the other hand, what I as a regulator worry [about] is that a price [could] become a barrier for connectivity.

“We are in a permanent conversation with the industry . . . to understand what the cause of this development is.”

Vălean’s intervention adds to political pressure on airlines over rising fares.

The Italian government has proposed capping prices on routes to some islands, although it partially backtracked in September and instead gave the country’s competition authority new powers to police ticket prices.

Airlines are free to set their own fares under EU laws, and the liberalised air market has historically driven down prices and opened up new routes.

However a surge in demand for flights has this year, amid a shortage of aircraft, drove up ticket prices. Many airlines retired planes during the coronavirus pandemic, while supply chain problems hit deliveries and inflationary pressures across fuel and labour also pushed up costs.

While ultra low-cost carriers Ryanair and Wizz Air are flying more than in 2019, most European airlines are not.

Airlines including British Airways owner IAG, Air France-KLM and Lufthansa still reported record profits over the summer, helped by rising fares, partly repairing the damage to their balance sheets during the pandemic. The global industry has more than doubled its profit forecast for the year, according to the sector’s trade body, as a result of surging post-pandemic demand for travel.

Vălean said she feared higher prices would continue because of the imbalance between demand for travel and tight supply of new aircraft.

“We do expect that capacity is not going to grow at the same level as the demand.”

Airlines also face paying a higher price to pollute after member states and the European parliament last December agreed rules that will speed up the phaseout of free carbon credits given to airlines under the bloc’s emissions trading system and require the industry to report on non-CO₂ emissions too.

Airline bosses have said they broadly support the EU’s ambitious climate targets, but insisted that they need more support if they are to cut emissions, particularly in the development of sustainable aviation fuels.

IAG, Lufthansa, Air France-KLM, easyJet and Ryanair have been contacted for comment.