Travel Bottleneck

Airfares Go Through the Roof

Lufthansa
It's getting more and more crowded inside Lufthansa planes. Source: Christian Charisius/DPA.

The last Air Berlin flight took off two weeks ago and as expected, the sudden absence of Germany’s second-largest airline with its 250 domestic flights per day has led to a shortage of capacity on some German routes.

Connections to and from the two Air Berlin hubs of Berlin and Düsseldorf have been worst hit. On routes to Hamburg, Munich or Stuttgart, a major rival to market leader Lufthansa and its budget unit Eurowing is now missing. The shortage of supply has gone hand-in-hand with an increase in prices, according to a recent assessment by the shopping website Mydealz whose analysts used the price search engine Skyscanner to research ticket prices on selected routes on September 20/21 and November 1/2.

They found that on working days, average short-haul prices in November were up 26 percent. At weekends, the increase was even greater at 38.9 percent. On medium-haul flights, the working-day price rise averaged 4.28 percent but the weekend fare was down by 42 percent. But price increases on the worst-affected routes are much higher still, with business-class airfares between Berlin and Frankfurt up 60 percent while business fliers on the Munich-Düsseldorf route faced an eye-watering 300-percent price hike.

Mydealz admits that such average comparisons over a brief period of time should be treated with caution. But the research shows that Air Berlin’s demise has boosted ticket prices. Lufthansa CEO Carsten Spohr admitted as much, telling Bild newspaper: “The few seats we can still offer are of course scarce and expensive.”

“The few seats we can still offer are of course scarce and expensive.”

Carsten Spohr, CEO, Lufthansa

The end of Air Berlin and of the UK’s Monarch Airlines plus the planned sale of bankrupt Alitalia may herald the kind of consolidation in Europe that the US airline industry has gone through — leading to a lack of competition that hurts consumers.

In the United States, four airlines – United, Delta, American and, a distant fourth, Southwest – now control three-fourths of air travel and many routes are serviced by a single carrier. Travelers in the United States face higher fares and poorer service as the airlines rack up billions in profit.

It’s an automatic process: the fuller the plane, the higher the price offered through the airlines’ booking software. If many seats are available, airlines offer cheap tickets to fill the planes. The effect is exacerbated if demand far outstrips supply, which is the case right now because, although Air Berlin’s planes have been sold, they’re not available to the buyers yet. Some 80 of Air Berlin’s 140 jets have yet to resume flying pending antitrust approval of the deal, leading to a daily shortfall of 60,000 plane seats.

As Lufthansa’s low-cost Eurowings unit now has no effective competition at many German airports beyond the hubs of Frankfurt and Munich, it’s free to set what prices it likes.

14 p05 Lufthansa – German monopoly routes 2-01

The question is how long this will go on. Lufthansa and Eurowings likely won’t be able to increase their capacities until the start of 2018 when they secure cartel approval to integrate the Air Berlin planes they’ve bought.

Mr. Spohr has said the group will offer 1,000 additional domestic flights from January. All eyes are on British rival EasyJet which plans to buy 25 Air Berlin jets. Cartel experts expect it to get the go-ahead soon. EasyJet is believed to be planning to offer flights between Berlin, Frankfurt, Hamburg and Munich, which would alleviate bottlenecks and put downward pressure on prices. But it’s unclear whether EasyJet will really fly those routes as the management has yet to provide details of its plans.

“It would be good for Lufthansa and definitely for many passengers as well if EasyJet announces as soon as possible on which domestic German routes it wants to fly in the future,” said Gerald Wissel of consultancy Airborne Consulting.

Jens Koenen leads Handelsblatt’s coverage of the aviation and space industry and writes about IT companies. To contact the author: koenen@handelsblatt.com

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