Flight prices are expected to remain higher than before the Covid pandemic until at least 2030

Two weeks ago, no-frills flights from the UK to the Canary Islands during the mid-term school holidays hovered around £1,000 for a return. These are prices perhaps more traditionally associated with flights to Australia, but continued capacity restriction and high fuel prices continue to drive up prices for consumers.

Flights to Australia are now around 110% more expensive than in 2019 and analysis by a consumer charity Who? said October mid-term flight prices were up 42% from pre-Covid levels. Average prices for flights from Gatwick to Dublin, booked six weeks in advance, rose 281% from £42 to £160. From Heathrow, flight prices have increased by 181%, from £84 to £236. This summer, Ryanair boss Michael O’Leary said the the era of “cheap, promotional…€0.99 fares” is over.

This is partly due to fuel cost. A recent report by economic consultancy Oxford Economics shows that jet fuel “spread” – the price difference between crude oil and refined jet fuel – has widened since the invasion of ukraine, from 17% during the pandemic to 45%. This poses a supply-side risk to travel.

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Airlines – which have incurred significant debt during the pandemic, more than $650 billion according to IATA estimates – are now less inclined to absorb rising operating costs. As a result, fares – which generally fell in the 2010s in a highly competitive and robust market – have risen sharply since 2020.

Oxford Economics predicts that while they may pull back a little next year, the recent trend of ticket price stimulus is unlikely to return. Average flight costs are expected to remain significantly higher than in the previous decade, at least until 2030.

However, the rebound in global tourism has been stronger than expected this year, with sun and beach tourism proving to be the most resilient form and Turkey best recovery among European destinations.

Whereas inflation poses a risk to the outlook for 2023, the recovery is expected to continue, albeit at a slower pace. Short-haul travel will continue to be favoured, with Oxford Economics forecasting it will reach 2019 levels in 2024.

Economic activity has slowed as inflation erodes incomes, but analysis by travel data analytics provider ForwardKeys of the effect on airfare purchases this summer showed the chaos at airports had a more detrimental impact.

However, looking at other markets like India, demand for travel to the United States has declined significantly this year as airfares have increased. ForwardKeys has seen the UK exit market recovery stall since the summer and warns that “this trend could potentially worsen as inflation remains elevated.”

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