With thousands of flights canceled or delayed in the US over the 4th of July holiday weekend and the end of the school term in Britain later this month threatening to become the next hotspot across the Europe, there is now a danger that some people will decide to sit out their summer getaway. While the next few months will still be strong for airlines and tour operators, the turmoil could dampen the rebound a bit.
EasyJet Plc, which announced the departure of chief operating officer Peter Bellew on Monday, said two weeks ago it would limit capacity after London Gatwick and Amsterdam Schiphol airports, its two largest bases, capped flights to deal with staff shortages. He is not alone.
All over Europe, airports and airlines are reducing their schedules. British Airways will withdraw around 800 more flights this summer, in a bid to reduce last-minute cancellations, Bloomberg News reported on Tuesday. Meanwhile, Scandinavian airline SAS AB said it had filed for Chapter 11 bankruptcy in the United States, a day after its pilots’ union announced it would begin strike action with immediate effect.
TUI AG, the world’s largest travel package operator, sees demand above pre-pandemic levels. Thomas Cook, now reborn as a UK online travel agent, continues to take bookings for later this summer. But there are signs the jostling is curbing some consumers’ enthusiasm for taking a trip.
Although still well above 2019 levels, there was a slowdown in demand in June in the US and UK, for both international and domestic travel, according to an analysis of Google travel data. by Sanford C. Bernstein & Co. Traffic to Booking.com and TripAdvisor Inc. also slowed in June, Bernstein said.
The drop in UK demand for international travel in early June was particularly pronounced and came after scenes of pandemonium at airports in late May as many Britons headed for sunnier climes when a two-day bank holiday coincided. with the traditional mid-term school holidays and the Champions League football final in Paris. But Richard Clarke, an analyst at Bernstein, says June also compares to a period of strong booking activity in 2019.
Rising prices can also wreak havoc. There will be few bargains available in the so-called “late” market this year, as there will be little excess hotel or air capacity. While the regular summer trips on offer will have been negotiated well in advance, with prices for flights and accommodation locked in, whether tour operators have to buy extra rooms or seats on planes in the ‘spot’ market , they will pay more. So will their customers.
And the inflationary pressures don’t stop there. Michael O’Leary, CEO of Ryanair Holdings Plc, a pioneer of low-cost flights in Europe, has warned fares will rise over the next five years as flying has become “too cheap” to generate profits.
In the United States, research from Destination Analysts, which has been monitoring traveler sentiment since the start of the pandemic, shows that some Americans are starting to reassess their plans amid rising costs.
In May, some 30.1% of 4,000 US travelers surveyed said inflation caused them to cancel an upcoming trip, down from 23.2% in April. When asked to rank costs that discouraged travel, the top two were gas prices and airfares.
Part of the problem at airports, ferry ports and trains linking Britain and France stems from growing demand. So some margin easing may not be a bad thing right now.
But that won’t be so welcome as airlines and tour operators head into the calmer fall and winter seasons. The biggest uncertainty will come when people have exhausted their lockdown savings over the holidays this summer and face rising costs for food, fuel and home heating. Year-end excursions might not be so festive – unless some of those people who have postponed their trip to July and August are booking for Christmas.
A holiday is a big expense, and it is likely to be eliminated from the budget. So far, the pent-up wanderlust of the past two years has shielded travel from the ravages of inflation. But that may be about to change.
If Europeans and Americans continue to book summer vacations in 2023, they might be reluctant to add a second getaway, say a trip during New Year’s Eve celebrations or Spring Break. They can also forgo the luxury hotel rooms and business class flights that characterized this year’s “revenge trip.”
So even if consumers remain calm and continue to go on vacation over the next few months, this could prove to be the last hurrah.
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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.
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