Martin Ferguson is managing partner of communications and live experiences agency Kintela and former VP of global comms, public affairs and events at American Express Global Business Travel
The latest data from the Office for National Statistics showed that inflation in the UK climbed to 3.8 per cent in July, its highest level since early 2024. The single biggest driver? A sharp 30 per cent rise in air fares. While the timing of school holidays explains part of the spike, there’s a bigger, more troubling story beneath the surface.
Airlines are operating in a climate where demand is high, load factors are stretched, and aircraft deliveries are delayed. These pressures are global, and travellers everywhere are feeling the impact. But what makes the UK stand out is how strongly rising airfares are feeding through into inflation.
In France, consumer inflation was around one per cent in July, and in Germany it fell to 1.8 per cent. Neither country has seen airfares singled out as a major driver of inflation in the way that the UK has. That contrast underlines how exposed UK businesses and households are to this particular cost pressure.
SMEs hit hardest
For companies, the impact is serious. Business travel is not a luxury – it’s a proven driver of economic growth. Each overseas trip helps organisations win clients, negotiate deals, share expertise, and expand into new markets. But when the cost of travel spirals, organisations inevitably scrutinise what really counts as “essential.” In the last quarter, travel managers have been reporting mounting pressure to deliver savings against a backdrop of rising fares and US president Donald Trump’s new trade tariffs.
For small and medium-sized enterprises (SMEs), which are more sensitive to inflation and less able to absorb shocks, the effect is even sharper. A missed trip for a smaller firm could mean a missed opportunity to grow internationally.
Industry forecasts earlier this year suggested only moderate fare increases, with some even predicting a softening of prices in late 2025. Clearly, those predictions have not held. One reason is that airline pricing models have fundamentally changed. Headline fares often look competitive, but they conceal a growing reliance on ancillary revenues, such as baggage fees, seat selection, meals and other extras that now account for close to 20 per cent of the total ticket price, according to Advito’s Travel Price Index. What looks manageable at first glance quickly balloons once unavoidable add-ons are included.
Hidden costs add fuel to the fire
These forecasts and data points highlight the same reality. Even where fares appear to be stable, the total cost of travel is still climbing. Corporate travel budgets are under pressure across Europe, with FCM Consulting reporting costs rising around 3 per cent year-on-year globally, and Advito data showing short-haul economy fares up about 5 per cent and business fares up 2 per cent.
These rising costs affect different groups in different ways. For leisure travellers, it translates into frustration and mistrust. But for businesses, it creates something more damaging: uncertainty. Opaque pricing may look like a short-term win for airlines, but against a backdrop of constrained budgets it risks unintended consequences. Because when companies can’t predict the real cost of travel, they cut back. That means fewer trips, slower deal-making, and weaker economic recovery.
Some cost increases are unavoidable. Fuel, airport charges, and sustainability investments all add to the bill. But these should be transparent and explainable. What we have instead is a patchwork of hidden fees and dynamic pricing that blur the true cost of travel and leave companies second-guessing whether a trip is worth it.
The UK’s July inflation data is the clearest warning sign, but the lesson is European. Even where inflation is lower, airfares are still rising and budgets are still under strain. Without greater transparency in airline pricing, we risk suppressing the very trade, innovation and business activity that Europe needs to recover and grow.