RDC Fare Watch Feb 2017

Apr 12, 2017


Fares fall 3.9% compared to last year, 6.5% in the UK

Fares for low cost airlines in Europe in February 2017 are 3.9% down on February 2016. As reported last month this trend is almost exclusively confined to advance fares, with fares 1 month and 1 week before travel down just 0.4% and 0.2% respectively. Given that there will be some knock-on effect of poor advance sales, we can say that demand for last minute bookings must be relatively strong despite the headline figure.

Image showing Fares in February 2017 verses 2016 by purchase point

Figure 1: Fares in February 2017 verses 2016 by purchase point

The report for this month focusses on the performance of the UK. It is impossible to mention the performance of the UK without mentioning Brexit – the uncertainty of UK aviation’s future within Europe continues to hang over its airlines and airports. Of particular interest will be the legality of Ryanair, Wizz Air and Norwegian’s UK bases and operations should the UK no longer form part of the European Common Aviation Area (ECAA). That aside, the UK industry appears to be operating oblivious of its current situation, as seat capacity is up a surprising 7.3% compared to February last year.

One core benefit of collecting LCC fare data is that we can understand the performance of these airlines without waiting for passenger data to be published. LCC’s rarely fail to fill their aircraft to around 80% of capacity – therefore when these airlines operate with an unsustainable level of capacity, their fares drop to reach the level that the market will fill their aircraft, almost regardless of profitability. This is exactly what we can see with the UK this year, last month the 7.3% rise in seat capacity corresponded with a 6.5% drop in fares.

Graph showing - UK fares in February 2017 versus 2016 by Airline

Figure 2: UK fares in February 2017 versus 2016 by Airline

Looking at the top ten LCCs operating into the UK, we can see that for the top four (easyJet, Ryanair, Flybe and Wizz Air, responsible for 86% of UK LCC capacity) all follow a similar line of capacity up and fares down. The biggest fare drops in the top 10 have been seen by Jet2 and Vueling, who not-coincidentally also have by far the largest increases in seat capacity. We covered Jet2’s significant increase in scheduled winter capacity last month, while Vueling are in the process of establishing themselves in the UK and therefore are trying to steal market share with low fares.

Graph showing - UK fares in February 2017 versus 2016 by destination country

Figure 3: UK fares in February 2017 versus 2016 by destination country

Analysing the top 10 European country markets from the UK – the majority of capacity is being thrown into Western European sun markets, such as Spain, Portugal and France. This is likely to be a result of the political instability in the Eastern Mediterranean forcing airlines to redeploy sun capacity across a smaller selection of destinations (it is worth noting that the drop in fares for these markets is smaller than the capacity increase). While Domestic routes remain remarkably stagnant, the only country markets maintaining increases in both capacity and fares are Germany and the Netherlands – this along with the relatively stable performance of last minute fares suggests to us that the business market remains strong.

© 2017 RDC Aviation Ltd. All Rights Reserved.

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Daniel Irvine


Daniel Irvine
Aviation Analyst

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