Across-the-Pond Market Gets Tougher for Big U.S. Airlines
Increased competition in the trans-Atlantic flight market is putting major pressure on U.S. airlines.
Bloomberg reported this week American Airlines Group experienced a 9.1 percent drop in trans-Atlantic fares, the biggest decline since the end of the recession in 2009. And American wasn’t alone, according to the report. Delta also recorded a downturn.
The reductions come as European budget carriers, such as Norwegian Air Shuttle ASA and Iceland’s Wow Air, turn up the heat by adding more flights and entering new American markets.
In July, according to the Chicago Tribune, Wow Air marked its entry into the Midwest market by offering $99 flights from O’Hare International Airport to Iceland. The airline also sold $149 tickets that allowed travelers to fly to Iceland and then continue on to one of Wow’s other European markets, including London, Paris, and Berlin.
The increased seat supply is dragging down fares in a lucrative overseas market, according to Bloomberg.
When recently reporting second quarter declines in its average fares per mile, American blamed low-cost competitors. Delta meanwhile, attributed its 7.1 percent decline to discounted leisure fares.
The trans-Atlantic competition is not good news for U.S. carriers already dealing with challenges domestically from budget airlines such as Spirit and Frontier.
But the U.S. airlines are likely to fight back by extending overseas the basic economy pricing currently offered at home, Savanthi Syth, a Raymond James Financial Inc. analyst, told Bloomberg.
Such economy priced tickets don’t allow travelers to select their own seats or choose upgrades. They also limit carry-on items. Even with all those drawbacks, the economy fares have helped American, United, and Delta to recover from a two-year slump in revenue per mile caused by the expanding low-cost airlines in the U.S., according to Bloomberg.
American and Delta declined to comment about the trans-Atlantic market for the Bloomberg story. United told Bloomberg it was happy with its performance.
Source: Travel Pulse
