Airline fares could fall as carriers struggle to fill empty seats during the downturn, according to a leading economist at the International Air Transport Association.

Brian Pearce, regarded as the aviation industry’s leading economist, predicts that fares could fall at least another 10 percent over the next year, coming on top over last year’s falls.
Transatlantic economy prices are down by an average of 34 percent, and those to Europe 31 percent lower. Premium class fares have fallen by an average of 25 percent during the same period.

Transatlantic traffic has been badly hit by the financial crisis, which has led to a dramatic drop in the number of bankers crossing the Atlantic.

Pearce argues that whilst airlines have tried to protect fares by cutting capacity and grounding aircraft, they also have little option but to offer more cheap seats, such is the slump in demand. “Airlines are burning cash and they have faced a collapse in revenues.”

“Liberalisation of the route has led to many new carriers coming into Heathrow and that has pushed the price down,” he said.

This has been triggered by the financial crisis, which has led to a dramatic drop in the number of bankers crossing the Atlantic.

Airlines have been responding to the slump in demand by putting even more cheap seats on the market, rather than cutting the cost of the cheapest ticket further and he argues that trend is likely to continue.

British Airways and Virgin Atlantic have been selling Transatlantic return flights for as little as £260. Once Air Passenger Duty, currently £40 a flight, fuel surcharges and airport taxes are levied, airlines are making little over £10 on the cheapest seats.

Business class fares have fallen drastically, especially on the London to New York route, where return flights can be picked up for £1,098 return - about a third of the full cost.
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