Last month we reported that average fares were up for LCCs across Europe for the first time in over a year. We warned that the timing of Easter causes some misleading comparisons for 2017 v 2016, but still there appeared to be an underlying trend of positivity. Any optimism has been tempered this month as our fare data for May 2016 shows fares for LCCs across Europe are down by 12% compared to May 2016.
Fares in May 2017 versus 2016 by purchase point
This 12% fall compared to May 2016 followed a 7% drop for May 2016 vs May 2015. In previous months we have pointed to the relatively stable performance of one-week fares to suggest that the business travel market is holding up, however even for those fares the average is down 7% - the second worst one-week fare performance since September 2016.
So why are fares down? The exact reasons May 2017 has performed so poorly are not immediately clear, however the overall downward trend is intrinsically linked with capacity. The chart below shows the ten largest European countries for LCC seat capacity, with their May 2017 v May 2016 changes in capacity and fares plotted. Eight of the ten countries are showing capacity up, fares down. Ireland and Norway, with their relatively remote and contstrained markets, are showing positive (albeit small) figures. Of the eight, one country stands out as having very poor fare performance despite a relatively insignificant increase in capacity – Germany.
Change in fares and seat capacity for top 10 European countries by LCC capacity
To understand the unique situation of the German market, we need only to understand the scale of the network consolidation of airberlin. The maps below compare the airline’s intra-European network in May 2016 versus May 2017.
Airberlin Intra-European network May 2017 versus 2016
Airberlin has cut almost 400,000 seats (24%) compared to May last year. However as we know from the previous chart, the total seats operate from Germany are not down. This is because Eurowings (+280,000) and Ryanair (+155,000) have stepped in to fight over the lost seats. The chart below shows how these airlines’ seat capacity from Germany has changed since 12 months ago.
LCC Seat capacity from German airports, May 2017 versus 2016
Finally, the chart below shows average short-haul fares from Germany for the three airlines. Airberlin has simply not been able to lower its cost base to meet its rivals, and now that they operate its former routes, the fares have dropped to a far more competitive level. The largest route taken over has been Nuremburg to Vienna, where last year RDC data suggested fares for airberlin were over €300 per passenger – this May, Eurowings have doubled capacity and brought fares down to just €70.
Average Intra-European fares from Germany for top three LCCs
Extrapolating this trend for the 400,000 monthly seats lost by airberlin to Eurowings and Ryanair – the situation in Germany becomes quite clear.
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