Analysis-Airfares peaking as travellers in Europe, Asia seek savings





airplane travel

(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% 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% of pre-pandemic levels – just 16.5% on U.S.-China routes.

Flight Centre Travel Group said international airfares sold in Australia fell 12.8% year-on-year in the first three months of the year.

Still, prices in Asia-Pacific are up more than 7% compared with 2019, with fares 70% higher in 2021 compared with 2019.

PRICE SENSITIVITY

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. Source

 




NEWS #2

Stocks Rise, Dollar Slips Ahead of Inflation Data: Markets Wrap

Markets Wrap

(Bloomberg) – Asian stocks rose, heading for their second day of gains on Tuesday, as the dollar slipped before a swath of inflation prints that’s expected to influence the direction of global monetary policy.

The MSCI AC Asia Pacific index rose, with stocks in Hong Kong leading gains. US and European equity futures remained firm. The Bloomberg dollar index was down for a third day, falling against all of its Group-of-10 peers as investors mull prospects for US interest-rate cuts. Australia’s currency outperformed. The 10-year Treasury yield remained steady.

“Upbeat risk tone weighed on the US dollar and supported the Australian dollar,” Peter Dragicevich, APAC currency strategist at Corpay, wrote in a note. “If we are right in our assessment that the US core PCE deflator moderates, the China PMIs improve, and/or statistical quirks see euro-zone inflation re-accelerate, we believe the USD could lose ground later in the week.”

Chinese property shares advanced after Shanghai lowered down-payment ratios and the minimum mortgage threshold, as bigger Chinese cities follow through on the central government’s aid for the property sector. Tech stocks in China gained as major Chinese state banks said they will put a combined 114 billion yuan ($15.7 billion) into a semiconductor investment fund.

Traders will this week be studying fresh inflation data from Australia to Japan, the euro region and the US. Bank of Japan Governor Kazuo Ueda and his deputy indicated there is scope for gradually raising interest rates now that the nation has shifted away from an inflation norm of 0%. Japan’s April producer prices beat estimates, jumping 2.8% from a year earlier.

“Things will pick up tonight when the US opens, and then I suspect the next few days, all else being equal, will be driven by end-of-month flows and then that crucial PCE Index release,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. “All we are seeing is the usual tidal currents in the market when there’s nothing much going on and no one is really around.”

The Federal Reserve’s favorite measure of underlying inflation is expected to show modest relief when it lands on Friday. Chair Jerome Powell has stressed the need for more evidence that inflation is on a path to the 2% goal before easing policy. John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among US central bankers due to speak this week. Source