The RDC Fare Watch for June 2017 has seen LCC fares across Europe decrease by 7% compared to June last year. This is also the first month since February 2016 where fares one week before travel have fallen further than the average, leading the experts in the economics of the air transport industry to suggest that "the business-market 'bubble' may finally have burst".
It is now a whole 12 months since we have seen a year-on-year rise in LCC average air fares in the monthly analysis and the latest report shows notable declines across all the time purchase points monitored: -8% three months prior to departure, -3% one month prior to departure and -11% one week prior to departure.
RDC Aviation says it is a "clear surprise" in this month's results that one-week fares have fallen by a much greater percentage than of any other purchase points. At several points in the past year it has highlighted the strong performance of one week fares, which have been the strongest performing purchase point in every month since September 2016). This had led it to conclude "the business market is holding up, it is simply leisure fares that are falling," but this month marks a clear departure from that viewpoint.
Looking across the first half of 2017, LCC average air fares in Europe are down 7% compared to the same period in 2016 and down 11% compared to the first half of 2015, according to RDC Aviation. This follows a 5.2% year-on-year growth in the first half of 2015 and puts average one-way fares for the period to just over €67, down from over €72 in 2014.
CHART - Average Air Fares for European Low-Cost Carriers (2014 - 2017)
Source: RDC Aviation
Europe's largest LCCs Ryanair and easyJet sit just below the two-year average and there is a wide variance between the best and worst performers over the period. Norwegian has seen air fares rise 8% between H1 2015 and H1 2017 as it has matured into new markets and overcome competitive pressures in home Nordic and Scandinavian markets. At the other end of the spectrum, the UK's Jet2.com has seen average fares fall over 40% in the same period, according to the analysis, due to its expanding business strategy.
At a time of pressure on yields, the air fare analysis across purchase points does allow us to see how the changing strategies of the LCC, especially the well documented Ryanair 'always getting better' project.
Launched in 2014, a wide range of customer service and digital enhancements such as a new website and app, new uniforms and cabin interiors, allocated seating and tailored business, leisure and family products have been delivered during the first three years of the programme.
This project has been supported by a network strategy that has seen the famous brand arrive into more primary airports with its city-to-city route focus, most notably of late Frankfurt Airport in Germany.
While RDC Aviation's analysis shows Ryanair's average air fares at the three month, one month and one week purchase points have fallen, as per the geographical trend between H1 2015 and H1 2017, fares one week from travel have actually risen by 4%, suggesting a notable increase in business bookings. For comparison easyJet, which adjusted its model and embarked on its push for business class passengers long before Ryanair, has seen a 13% decline in fares one week before travel.
Our own The Blue Swan Daily analysis of OAG schedule data shows that LCC capacity in Europe continues to rise at a double-digit rate. Departure seats from Europe within the sector rose 11.8% in the first half of 2017 versus the same period last year. This continues a trend that began in the first half of 2014 with a 10.3% growth and followed in the same period in 2015 (+12.5%) and 2016 (12.9%).
CHART - Largest LCCs in Europe (week commencing 31-Jul-2017)
Source: CAPA - Centre for Aviation and OAG