Two political parties in the Netherlands want to implement a minimum ticket price for flights to prevent airlines from engaging in price wars after the corona crisis. According to the parties, this minimum price would have to be set at 35 euros. According to Floris de Haan, senior researcher in Air Transport Economics at Erasmus School of Economics, this minimum price would not discourage many travellers from buying flight tickets. His research shows that the demand for flight tickets hardly decreases when there is a slight price increase.
Step in the right direction
Tourists look at the total cost of a vacation, says de Haan. For both flights within Europe as well as business trips and flights outside of Europe, an increase in the ticket price by only a few euros will not make a big difference. Nevertheless, de Haan can understand the idea of a minimum price. ‘It can be the next step towards a fair ticket price. Ideally, you want to see the negative effects of air travel reflected in the prices', says de Haan. Other options to achieve this could be to implement a CO2 price or a compensation for noise disturbance.
Price war
It is important to make a distinction between budget airlines such as Ryanair, Transavia and EasyJet and airlines such as KLM, Lufthansa and British Airways. The latter receives financial aid and has to repay debts or comply with sustainable innovations, all of which increase total costs. For budget airlines, things are completely different: they are already engaging in price wars. EasyJet is selling one million tickets for £30 this summer and Ryanair indicated that it is willing to sell its tickets at any price in order to get their flights full.
Higher ticket prices in the future?
Does all this mean that we can start preparing for higher ticket prices in the future? The answer is no, not yet. It still remains to be seen whether the plan will actually be implemented. First, the plan needs to gain the majority in the Dutch House of Representatives.
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The full article from NOS, 17 June 2020, can be found here (in Dutch).