According to a new report from GlobalData, Ryanair’s move to increase capacity reveals a trend toward low-cost carriers in the wake of pandemic woes.
GlobalData’s Q3 2021 Global Consumer Survey showed that 58% of those surveyed keyed on affordability as the main factor in deciding where to go on holiday. And of course, the sentiment reverberates industry wide for obvious reasons. Naturally, Wizz Air, easyJet and Ryanair have all projected that July 2022 capacity levels will be higher than 2019.
The pandemic, the Ukraine crisis, and spiraling inflation emerging as a crisis all affect people’s travel plans, not to mention end-to-end costs for things like hotels, meals, and infrastructure costs associated with doing business. So, it’s fairly easy to predict budget-friendly companies benefitting. Craig Bradley, Associate Travel & Tourism Analyst at GlobalData, had this to say:
“With the rising fuel costs, air fares are increasing to cover operational overheads. Whilst the low-cost sector is as much affected by these as full-service carriers (FSCs), the typically young age of their aircraft means that many are more fuel efficient, helping to reduce fuel expenses. The low-cost business model is also designed to reduce other operational overheads meaning that fares can stay relatively low despite the current climate.”
Bradley also pointed out some of the other factors impacting the industry. He commented on how the business travel sector is impacted, adding this:
“With passengers potentially booking more flights with low-cost airlines, this is likely to impact multiple sectors, especially business travel, where corporate travel budgets have already been squeezed. In an April 2021 GlobalData poll, 43.2% of respondents expected their business to reduce their corporate travel budgets significantly. Fast-forward to May 2022, this is unlikely to change given the current economic climate many businesses are facing.”
Finally, the GlobalData report showing the shift toward budget flights, also suggests full service airlines will have to shift gears. In effect, the big airlines will begin to resemble, more and more, these more efficient budget carriers. This is especially true for short-haul flight. The question of whether or not the full-service airlines can come up with loyalty or other programs that will offset the loss of business to Ryanair and the others? Bradley thinks these economics in the wake of crises will create a better and stronger industry.
