It has been widely reported that in this period of uncertainty, margins have been severely affected. Only at the very low end of the spectrum are we seeing any increase in volume, and this is achieved through tiny margins.
It’s not only the uncertainty, though, or the fact the pound is low against the euro, which is causing this. In fact, this time last year, sterling was lower against the euro, and recently it has performed well in spite of the threat of leaving the EU. Turkey – and also Egypt and Tunisia – are benefiting because they have cheap, yet quality, mass-market product that facilitates low prices while simultaneously providing operators with acceptable margins.
The truth is that the industry is on a hiding to nothing unless capacity is reduced, yet we all know this is unlikely to happen. Not only are there too many aircraft, but we now have unlimited accommodation to match, thanks to the so-called sharing economy.
People are providing beds for the Airbnb phenomenon throughout the world. Large areas of cities and resorts have now become deserts for local inhabitants as accommodation is held for short-term lets.
In Malaga, 40% of apartments are currently empty, waiting for that short-term let of a few days that will yield as much revenue as a month’s local let. Those visitors looking to live like locals are simply holidaying with other tourists, though they may not realise it.
There was a time that, when demand was low, capacity was taken out of the market, but the no-frills airlines’ thirst for growth and the never-ending supply of beds – of whatever quality – has put paid to that. The attraction of cheap fares linked with cheap beds has seduced us all and is, unfortunately, the perfect antidote for the current economic uncertainty and tightening of belts.
Ryanair is cheap and constantly growing but, according to recent reports, is now one of the EU’s top 10 polluters. The airline industry is buying hundreds of new aircraft but, no matter how “green” these are, the increase in volume far outweighs any fuel and emissions efficiency.
A solution to the airlines’ emissions problem within the next 10 years – which is vital before it’s too late for our planet and us all – can only come through legislation worldwide to curb growth, and that will inevitably lead to an increase in prices.
“Elitist!” I hear you cry. “You are saying only the rich will be able to fly.” Well, I have a perfectly good diesel car, nine years old, and the mayor of London now charges me £24 a day if I want to drive it into London – so I don’t. Yet I haven’t heard any cries of elitism levelled against the mayor now that only the rich can afford to drive into our capital.
Unfortunately, we are facing the unpalatable fact that we will have to learn to live, for the time being, in a no-growth economy if we want to safeguard our future. In order to achieve this, we will all have to make sacrifices. Having to pay more to fly will simply be one of these.
Noel Josephides is director of Aito
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