EU urged to oppose Italy's cap on airfares

Airlines flying between Italy's mainland and its islands of Sicily and Sardinia have urged the European Union to oppose Rome's plan to cap fares.

Operators, including Ryanair and easyJet, were surprised last week when Prime Minister Giorgia Meloni's government unveiled plans to limit price rises on internal flights.

Meloni made the move after airlines put up ticket prices by 70 percent in recent months.

The airlines responded to news of a looming price cap by urging the EU to make it clear that enterprises can set their own prices.

The lobbying has included a letter from trade body Airlines for Europe, or A4E, which urges the EU "to clarify with Italy that this intervention impacts the free and deregulated air transport market in Europe".

Low-cost carrier Wizz Air told City A.M. that it is also lobbying Brussels.

"Our strong view is that the proposed plan is contrary to the principle of pricing freedom, which is entrenched in EU law," a spokesperson for the carrier said.

The Financial Times, which has seen the letter from A4E Managing Director Ourania Georgoutsakou, said the organization noted that airlines are "concerned that if this law is adopted, it could set a precedent and lead to a domino effect, resulting in similar regulations being adopted in other EU member states".

The letter said any cap would "violate" airlines' right "to compete wherever possible, set prices, and define services as they see fit".

'Illegal' step

Ryanair, which is Europe's largest airline by passenger numbers, told the Financial Times the proposed cap was clearly "illegal".

And it said a cap would drive up the cost of flights because many operators would scale back operations. "If the Italian government wants to reduce fares to the islands, they should lower costs which would bring more capacity and more passengers at lower average fares, even during peak seasons," Ryanair was quoted by The Irish Times as saying.

Italy announced its plan to cap fares soon after unveiling a proposed windfall tax on banks' profits. Both moves have been condemned by industry groups as contrary to capitalist principles.

However, the high cost of fares has become an issue throughout Europe this year, and politicians have been under pressure to act. Fares, which have risen by around 30 percent across Europe, have been impacted by high inflation and more expensive fuel, as well as booming holiday demand following the end of COVID-19 travel restrictions. Airlines also said there has been a shortage of planes and a lack of qualified workers.

Meloni's proposed cap calls for busy-season flights to cost no more than 200 percent of the annual average.