Europe will see air fares rise on key business routes in 2023, with intra-regional business class fares expected to increase 6 per cent, according to the American Express Global Business Travel (GBT) Air Monitor report, released on Thursday (8 December).
The annual forecast of air fare movement combines historical transaction data with International Air Transport Association (IATA) booking demand and capacity constraints, macroeconomic variables including per capita GDP, and key inputs such as the price of oil.
Surging energy prices and high inflation are set to create a challenging operating environment across Europe, and despite economic downturns expected in Italy and Germany, air fares are set to increase.
Business routes from Europe to Asia will see the biggest year-on-year increase, with a 7.8 per cent jump in ticket prices, largely due to reduced capacity and the closure of Russian airspace following the February 2022 invasion of Ukraine.
Flights connecting Europe with the Caribbean and Middle East are expected to increase by 7.4 per cent and 7.5 per cent, respectively, while routes to North America and Africa are set to rise by 4.6 per cent and 4.9 per cent, respectively.
According to the report, price increases are driven by high fuel prices, reduced capacity, and national carriers’ strong footprints within their home countries. The foreign exchange effect is another contributing factor, with the report stating “as long as the euro and sterling remain weak relative to the dollar, prices will face upwards pressure”.
The report also identified global trends driving prices movements in 2023. These include a new contracting landscape as airlines prioritise a return to profitably, airline and airport labour shortages, reduced capacity compared to 2019 levels, and carrier-imposed fuel charges (known as YQ or YR surcharges).
Since March 2022, the YQ/YR surcharges on a roundtrip business class ticket from New York to London have increased by $500 to $1,700, according to Amex GBT transaction data cited in the report.
Additional factors influencing the aviation industry in 2023 will be the availability of sustainable aviation fuels (SAF) to address the sector’s carbon footprint, and an increased push to drive New Distribution Capability (NDC) adoption.