LONDON/SEOUL/CHICAGO, May 28 (Reuters): Airfares in Europe and Asia are starting to plateau or fall in a sign that a prolonged post-COVID travel boom is waning, delivering a setback for airlines struggling with higher costs and limited aircraft availability.
A global imbalance between supply of flights and pent-up demand as air travel opened up after the pandemic drove up ticket prices and passenger yields - a measure of average fare paid per mile by each passenger.
But industry executives, investors and analysts said that the "travel at all costs" trend is balancing out, with some customers becoming more sensitive to pricing as they grapple with inflation that has driven up living costs.
Budget carrier Ryanair's CEO Michael O'Leary this month warned ticket prices would grow less than expected, sending European airline shares down.
"It is a bit surprising that pricing hasn't been stronger and we're not quite sure whether that's just consumer sentiment or recessionary feel around Europe," O'Leary said.
Fares were flat across the bloc in the first months of this year compared with 2023, data from travel research group ForwardKeys shows.
The picture is starker in Asia-Pacific where fares have dropped the most, down around 16 per cent in the Jan-April period year-on-year, the data shows.
Singapore Airlines last week posted a record annual profit, but net profit growth fell in the last three quarters. The benchmark Asian carrier said it expects passenger yields to further moderate as airlines expand capacity.
Asia has been slower than other regions to lift restrictions and ramp up flights to overseas destinations.
"We believe supply and demand will rebalance itself ... airfares would continue to normalise throughout 2024," Ronald Lam, CEO of Hong Kong-based Cathay Pacific, said in March.
Travel to markets like Europe, America and Australia from China has not recovered. China's economy is sluggish and international flights remain around 70 per cent of pre-pandemic levels - just 16.5 per cent on U.S.-China routes.
Flight Centre Travel Group said international airfares sold in Australia fell 12.8 per cent year-on-year in the first three months of the year.
Still, prices in Asia-Pacific are up more than 7 per cent compared with 2019, with fares 70 per cent higher in 2021 compared with 2019.
Economists and investors are not yet pessimistic. Travel is still a spending priority for most consumers, especially in Europe and the United States, economists said.
But economists and analysts said flatter European airfares point to lower earnings and savings rates across the continent, leading consumers to seek cheaper options, especially as hotels and car hire become more expensive.
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