Airlines are reducing flight prices to entice tourists into booking summer holidays, as concerns over jet fuel shortages have caused holidaymakers to delay their purchases. Industry figures indicate that consumers have been postponing buying flights following repeated warnings about threats to supply chains stemming from the conflict in the Middle East.
Impact of Middle East Conflict
Iran closed the Strait of Hormuz after being attacked by Israel and the United States, restricting the flow of essential goods from the region and driving up prices. One of the commodities affected is jet fuel, with widespread warnings about shortages first issued at the beginning of April, and prices having doubled since before the war.
Price Drops Despite Warnings
Since then, prices for flights to some of the most popular destinations in southern Europe have counterintuitively been dropping, according to analysis by the Financial Times. Between April 9, when European airports first warned that jet fuel was in danger of running out, and May 6, fares for a week-long trip in July dropped in 27 of the top 50 European flight routes. They declined by 10 percent or more for 15 of the routes, including from Heathrow to Nice, and as much as 44 percent in the case of Milan to Madrid. While prices on some of the other routes increased, the change was smaller.
Consumer Confidence Game
Airlines and holiday companies are now locked in a 'confidence game' with consumers, according to Barclays analyst Andrew Lobbenberg. He said: 'People are reluctant to book, they are booking late and the airline and holiday companies are having to incentivise them with lower prices.' Notably, this trend is primarily observed in the European market, while travellers in the US appear unperturbed.
Domestic Travel Preference
Trivago managing director Johannes Thomas told the FT that 'in times of crisis... people stay domestic'. This was reflected by an Ipsos survey, which found that a fifth of people had switched an international holiday for a domestic one this year, while another fifth is considering the move. Wizz Air chief executive József Varadi explained: 'There is an element of uncertainty in the short term, people don’t know what is going to happen, am I going to lose my job? Am I not able to fuel my car? There is a level of hesitancy.' He advised consumers to buy now, because waiting may lead to higher prices.
Long-Haul and Package Holiday Trends
While prices are moving in the right direction for customers within Europe, carriers that operate more long-haul routes have warned their flights may get more expensive. However, package holiday providers are following suit by slashing prices, with holidays £110 cheaper on average than a year ago. Caspar Nelson, holiday expert at On the Beach, said last month: 'Every day prices seem to be going up, petrol, energy and mortgages to name a few, but in April, deals for holidays departing in the next three months are cheaper than last year. This is a rare, sunny spot for consumers right now and our advice is quite simple, now is the right time to book and lock in your price, take advantage of these deals while they are still working in your favour.'
