Not much sign of winter sun giving the travel industry a healthy glow. Barely a day after Ryanair cut a million flights to Spain, tour operator Jet2 reduced its capacity by 200,000. If you were hoping to get some much-needed sunshine in the darker months, it’s going to cost you.
What’s going on? Well, Ryanair is having one of its regular ding-dongs with an airport operator, something its pugnacious boss Michael O’Leary seems to live for. The company has lambasted what it calls a “shameless” fee increase on the part of Aena, Spain’s national airport operator.
The Ryanair boss might have a point. After a record year, Aena is imposing a 6.6 per cent hike in airline fees from 2026, more than double Spain’s rate of inflation (2.7 per cent).
The Canary Islands – a particularly popular destination with Britons, especially in the winter months – are bearing the brunt of the cuts, with 400,000 fewer Ryanair flights to those sun-kissed rocks.
Low-cost charter operator Jet2 – whose ubiquitous adverts for its package holidays use Jess Glynne’s Hold My Hand as its soundtrack – is in a different position, and its problems are potentially more serious if they are reflected across the travel industry. The group has complained of “a less certain consumer environment” and warned of “limited visibility given the later booking profile with the remainder of summer and much of winter seat capacity still to sell”.
You want that in English? Sí, por favor: The company is telling us that the persistent drumbeat of economic gloom, much of it coming from Britain’s government, has battered consumer confidence. Jet2’s customers are booking late as a result.
Worse still, it’s worried that they mightn’t book at all. That’s what it means by a “lack of visibility”.
If you’re worried about your job, or your financial situation, as many Britons are, of course you’re going to be cautious when it comes to buying flights and holidays. Maybe you’ll feel able to splash out a week or two before you’re due to go. But maybe you won’t.
Perhaps we can forgive Jet2 for the mangled corporate speak in its announcement. When the punters aren’t biting and you don’t have any idea how many packages you’re likely to sell, things could get very nasty very quickly. The company has already said that its earnings are set to come in at the bottom of the forecast range. That could easily get worse. The decision to (ugh) “exercise capacity discipline” therefore looks wise.
Profit warnings are like viruses. Once a company has been infected, they tend to multiply, and the sickness gets worse before it gets better. Jet2 shares duly came under sustained fire as a result, falling by more than 20 per cent.
I hate to sound like a scratched piece of my beloved vinyl, but the company is as much a hostage to chancellor Rachel Reeves’ late Budget as anyone. If it isn’t as bad as feared, great. But if it leaves people feeling significantly worse off – a decent bet, as things stand – then they might not book at all this year.
No wonder Jet2’s investors fell over each other in a race for the exit. You can now buy greatly discounted shares to reflect the discounted deals that may come if the company is left scrambling to fill remaining seats closer to departure dates.
One does wonder if concern over consumer demand is at least partially behind Ryanair’s move. O’Leary would start an argument with the wall if he was left alone in a room for too long. But he’s also a canny businessman. One side benefit from Ryanair’s cuts is that it won’t be flying half-empty planes, assuming Jet2’s woes are indeed a symptom of a wider problem.
The latter has promised to “maintain attractive pricing to ensure our customers are able to get away from it all and enjoy a relaxing holiday”. But I don’t actually think the company has much choice. I suspect consumers will remain highly price-sensitive whatever Reeves does. They could be tempted to go if the deals are good – but they’ll be more than willing to stay home if they’re not.
The travel industry is going to have to deal with a lack of pricing power. At last, some good news for the Bank of England, given the role air fares have been playing when it comes to Britain’s stubbornly high inflation of late.
