EU investigates surge in airfares

The European Union has opened an investigation into a recent surge in airfares across Europe, following airlines' decision to hike prices by up to 30 percent during the summer, leading to sizable profits.

According to data released by the EU last month, average airfares across Europe this summer were 20 to 30 percent higher than in 2019.

In an interview with the Financial Times newspaper, the EU's transport commissioner, Adina Valean, said officials were "looking into detail… of what is exactly going on in the market and why".

While the European Commission lacks the power to control airfares, Valean's involvement escalates pressure on airlines over the price hikes, which have been spurred by travel demand and supply-chain complications.

The commission is looking for clarification from airlines regarding fare increases and connectivity within the bloc, and is seeking a deeper understanding of the industry dynamics driving the price increases, Valean stated.

"We are still investigating because we don't have a full, detailed explanation," she said.

The EU is concerned that elevated airfares could impact the EU's more remote regions, including islands and isolated territories that depend on air travel for links to the rest of the bloc.

"We cannot go as a regulator into micromanagement of prices or imposing that, I don't think this is doable or desirable," Valean said. "On the other hand, what I, as a regulator, worry (about) is that a price (could) become a barrier for connectivity. We are in a permanent conversation with the industry… to understand what the cause of this development is."

Under EU laws, airlines are allowed to determine their own fares.

This year, a rise in demand for flights coupled with a shortage of aircraft has driven up ticket prices, the FT noted. Some airlines retired planes during the novel coronavirus pandemic, while supply-chain issues impacted deliveries, and inflationary pressures on fuel and labor further escalated costs.

Despite the challenges, airlines including British Airways owner IAG, Air France-KLM, and Lufthansa reported record profits this summer, due to increasing fares, which has partially restored their pandemic-affected balance sheets.

The global airline industry trade body, the International Air Transport Association, has forecast profits will double this year, due to surging post-pandemic travel demand.

However, Valean expressed concern that higher prices might persist due to the mismatch between travel demand and the limited supply of new aircraft.

The Airports Council International trade body reported last month that full passenger traffic recovery was finally in sight for Europe's airports.

Olivier Jankovec, director general of ACI Europe, said close to 50 percent of Europe's airports have now exceeded their pre-pandemic passenger volumes.