European airlines' weak prices reflect damaged consumer confidence

Eurostat data for passenger air transport show significant price weakness in Europe in 2H2020, particularly for international flights. During the COVID-19 pandemic pricing has, on the whole, held up best when airline capacity has been at its tightest, and fallen more rapidly when airlines have sought to return capacity to the market.

This price elasticity is to be expected. At a time of damaged consumer confidence in air travel, caused by months of uncertainty over government restrictions and concerns over the transmission of the virus, demand requires strong price stimulation when capacity is growing back again. A lack of business travel adds to downward price pressure.

Total seat capacity in Europe is down by 75.4% in the week of 22-Feb-2021 - bumping along the bottom ahead of a hoped-for summer recovery and still lagging other regions.

Middle East is down by 57.1%, Africa is down by 54.0%, North America by 46.9%, Latin America by 45.9% and Asia Pacific by 40.9%.

Europe's passenger numbers have fallen worse than seat capacity throughout the crisis. Restoring consumer confidence will be a big challenge in realising the recovery.