As the IATA northern hemisphere winds down and airlines reflect upon a season of high load factors, operational challenges and geo-political disruption, we’ve explored airline schedules and pricing data to identify the impact on yields of a 4.3% increase on intra-European capacity this summer versus summer 2023.
Airline capacity vs airfares: intra-european summer airfares in focus
Using OAG’s airline schedules and airfare data we analysed all flight routes with more than 400,000 scheduled seats over the summer season to examine how increases in airline capacity have affected average airfares. Interestingly, the results are not always what you would expect!
In absolute terms, the 4.3% capacity increase resulted in average airfares falling by just 0.2%, suggesting that demand remained strong enough to absorb the extra capacity, and that will certainly be reassuring for airlines as they head for the winter season. However, the level of disruption that can occur to airfares when a new airline enters the market or an existing operator adds capacity results in winners and losers. For example, an ultra low-cost carrier (LCC) such as Ryanair will inevitably lead to a greater change in airfares than perhaps a more regular carrier such as Air Europa, but is that always the case?
The chart and table above plot the percentage changes in airline capacity and airfares for twenty routes across Europe. Approx. 80% saw a reduction in airfares as new capacity was added to the market. However, three flight routes defied the logic of more capacity meaning lower airfares these are:
- Bristol to Mallorca (BRS – PMI)
+ 14% capacity, largely due to TUI Airways boosting their capacity by 52% over the summer.
+ 9% airfares. - Madrid to Venice (MAD – VCE)
+ 21% capacity, as Air Europa entered this market.
+ 6% airfares. - Amsterdam to Prague (AMS – PRG)
+ 16% capacity, due to increases by KLM.
+ 0.7% airfares; holding a similar level to the previous season.
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Impact on Airfares as New Airlines Enter the Market
The most impacted route, in terms of seeing lower airfares this summer, was Berlin to Rome (BER – FCO) where the arrival of a Wizz Air service on the route has led to:
- + 75% capacity.
- - 31% airfares.
The market has certainly been stimulated, but easyJet and Ryanair have undoubtedly responded to the entry of another low-cost airline. It will be interesting to see if all three airlines will offer as much capacity in Summer 2025, or will one of them find somewhere else to place capacity?
- Rome to Lisbon (FC0 – LIS)
+ 49% capacity; a result of Ryanair introducing 325 flights and TAP Air Portugal increased frequency with another 168 flights.
- 8% airfares; this reasonably small fall in airfares shows a remarkable level of pricing discipline given such a large capacity increase. - Alicante to Barcelona (ALC to BCN)
+ 34% capacity; Ryanair’s entry alongside Vueling led to a large capacity increase.
- 7% airfares. - Athens to Milan (ATH-MXP)
+ 18% capacity.
- 18% airfares; Ryanair’s largest impact on airfares was on this route where this summer six airlines competed, and Ryanair were the only new entrant.
Binter Canarias entered two of the markets analysed, perhaps surprisingly given their profile, with mixed impact:
- Gran Canaria to Madrid (LPA – MAD)
+ 31% capacity.
- 8% airfares; a modest reduction given the increase in capacity. - Madrid to Tenerife (MAD – TFN)
+ 29% capacity.
- 21% airfares.
On both routes Iberia increased their frequency of service to compete against the new entrant.
Tracking capacity changes and airfares provides an interesting insight into the impact of any new services and, ultimately, route profitability for the airlines operating. The impact can also be a consequence of which airlines are adjusting capacity and it is possible to analyse a whole market or selected countries over a given time series.
Certainly, for airport operators, regulators and indeed airlines - who perhaps want to grow but also avoid the potential risk of excessive reductions in airfares - understanding the likely impact of a competitor entering your market is a fascinating data point for further development.
Methodology:
- Flight routes are intra-European only.
- All flight routes had over 400,000 scheduled seats in both directions during the summer season of 2024 (as defined by IATA as beginning on the last Sunday in March and ends on the last Saturday in October).
- Airfares price calculation is based on approx. 10 billion airfare records for intra-European routes and the calculation method is an average of all observed prices from first observation (6 months prior departure) to last observation at departure.