Airline pricing strategies for the summer restart
As airlines prepare themselves for what they all hope will be a proper restart of travel this summer, what do the current pricing actions tell us about the strategies of the main players in the UK short-haul market?
Back in July last year, I took a look at pricing on the key London - Spain market for the first week of August. I thought it would be interesting to do the same this year, with a view to working out what current pricing tells us about the approach each carrier is taking to selling the summer.
I’ve pulled some pricing data for routes from London to a variety of Spanish destinations from Expedia. The departure date was Saturday the 31st July, with a return on Monday 9th August. Whilst there is considerable uncertainty about the timing for lifting UK travel restrictions, it seems a fair bet that borders will be open by then. So, this should be a period for which airlines are expecting to see decent demand.
The following chart shows the pricing data. There are several price points for each airline in many cases, due to multiple outbound / inbound flight options where carriers operate more than one flight per day.
Source: expedia.co.uk, GridPoint analysis
As we saw last year, pricing to Spain’s two biggest cities, Madrid and Barcelona, is the weakest. These are destinations which normally have high frequency to London, but they are not traditional summer leisure destinations.
It is immediately clear that Ryanair is being very aggressive on pricing, with the lowest lead-in prices in every market. At the other extreme, British Airways is offering very high prices on many of its flights. BA does have some more competitive fares available, but for the most part the company seems strangely uninterested in competing for volume. Some of the answer lies in BA’s distribution strategy. The fares on its own website are generally lower than through Expedia. For example on London - Malaga they are £65 lower, bridging more than half the gap to easyJet’s fares.
But it still seems to me that BA is allowing its competitors to build a solid platform of bookings without putting up much of a fight. Quite why this is the case is not clear. It cannot be because they are already fully booked. I had thought that easyJet might come under pressure during the restart, caught between unmatchable pricing from Ryanair and BA chasing volume in a way they wouldn’t do in normal market conditions. However, that doesn’t seem to be happening, based on this evidence.
Only on Barcelona does IAG seem to be scrapping for volume, with Vueling coming close to Ryanair’s prices and BA generally under-cutting easyJet.
Will things change on April 12th?
Perhaps BA is waiting until the government announces its policy on reopening borders, something that is supposed to happen on April 12th. If the government signals that travel will be possible again from May 17th onwards, there could be a surge in bookings, based on past experience.
However, there is no chance of BA being short of capacity, even if demand surprises on the upside. If necessary, BA could deploy wide-body capacity on short-haul markets.
Quite why they are allowing their competitors to build early volume unchallenged is quite puzzling to me.
