Although the Commission has no power to regulate air ticket prices, Vălean’s intervention puts pressure on industry companies to justify recent price hikes, which have been fueled – at least in part – by rising tourism demand and problems in supply chains
The reasons behind the explosive increase in prices on European flights – which brought tickets up to 30% higher this summer compared to 2019 – have begun to be investigated by the European Commission. The officials of the E.E. “they are thoroughly examining… what exactly is happening in the market and why,” as European Transport Commissioner Adina Vălean told the Financial Times.
Although the Commission has no power to regulate air ticket prices, Vălean’s intervention puts pressure on industry companies to justify recent price hikes, which have been fueled – at least in part – by rising tourism demand and problems in supply chains . She said she is seeking an explanation from the companies for the upward trend prices appear to be taking and the potential obstacles they pose to the bloc’s connectivity.
According to Vălean, the Commission does not intend to significantly intervene in the way the aviation market operates. It simply asks for more details about the factors which led to the rise in prices and consequently to the increase in the profitability of the airlines.
The impact of high prices
A key concern of the Commission is that expensive air tickets may cut off hard-to-reach destinations, such as islands or isolated regions, that rely on flights to connect with the rest of the bloc.
“As a regulator we cannot intervene in issues like prices…I don’t think that is possible or desirable. On the other hand, what I worry about as a commissioner is that prices can become a barrier to connectivity. We are in constant communication with the industry…to understand what is the cause of this development,” Vălean told the FT.
It is worth noting that airlines have the ability to set their own prices based on European laws, while in relation to historical data, prices have dropped significantly and new routes have been opened. However, a surge in demand this year, amid a shortage of available aircraft, has pushed up prices. In the meantime, many airlines have reduced their fleets during the pandemic. Also, problems in supply chains weighed on aircraft deliveries. Finally, inflationary pressures boosted fuel prices and labor costs.
However, major airlines operating in the bloc, such as British Airways parent IAG, Air-France-KLM and Lufthansa, posted record profits over the summer. Also, thanks to a recovery in travel demand, industry-wide profitability forecasts for this year have more than doubled.
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