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Financial crisis tipped to cut cost of air travel

8 December 2008

The price of air tickets should start coming down soon because of the world financial crisis, experts are predicting, while ruling out a plunge that would endanger the health of airlines.

Cut price airline Ryanair’s boss Michael O’Leary forecast a reduction in an average ticket of between 15 and 20 percent by the end of March, and claims to be attracting passengers from more conventional companies like British Airways.

Most airlines nowadays use the yield management system, whereby prices are adjusted by computer on an almost daily basis in line with demand, starting relatively low then rising if a particular flight fills up, or falling if it does not.

Few airlines have yet adopted an aggressive pricing strategy, as they try to recover from the massive cost of fuel which neared 150 dollars a barrel in mid-July, forcing them to slap surcharges on tickets.

While oil has now fallen to a third of this level, companies have held back from price-cutting at the same rate, while from time to time announcing a reduction in the surcharges since September.

source: AFP

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