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AmextaFinance > News > Travellers hit the skies even as ticket prices and temperatures soar
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Travellers hit the skies even as ticket prices and temperatures soar

News Room
Last updated: 2023/07/28 at 5:40 PM
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Travellers determined to take to the skies despite soaring ticket prices have pushed airline profits to fresh heights, as resilient consumer spending buoys the global economy.

As they reported record profits on Friday, British Airways-owner IAG said trips across the Atlantic and to leisure destinations had been particularly popular “as customers prioritise holidays”, while Air France-KLM said high-spending holidaymakers were filling business class cabins. 

The strong bookings — reported as temperatures hit new records and the UN secretary-general warned of “global boiling” — defied a sharp rise in air fares, which have risen about 30 per cent in Europe this year.

In the US, United reported a 42 per cent increase in revenue from flights to Europe in the latest quarter compared with the same period last year while Delta reported a 65 per cent surge in sales of transatlantic flights.

“Consumer spending has remained resilient with spend on experiences and travel remaining a focus,” said Mastercard chief executive Michael Miebach this week as the payments company reported that cross-border spending by its card users had reached 154 per cent of 2019 levels in the second quarter.

Royal Caribbean, one of the world’s largest cruise lines, on Thursday said its business was “firing on all cylinders” because of “exceptionally strong” demand for cruises and a “step change” in bookings and prices. 

Consumers’ willingness to spend in the face of higher prices and rising interest rates is raising hopes of the US avoiding a recession. US GDP growth accelerated to a better-than-expected 2.4 per cent in the second quarter, with a 1.6 per cent rise in consumer spending also surpassing expectations. 

From Colgate-Palmolive to Coca-Cola, companies have this week reassured investors that the “resilient consumer” is still spending. UK cinemas have been at their busiest for four years as Barbie and Oppenheimer hit the screens last week. In the US, cinemas had their strongest opening weekends this year.

Although many households have retrenched, and the poorest have been hit hard by soaring food and energy costs, consumption has held up better than many had expected in the US, UK and eurozone.

“In numerous economies, consumers have not yet drained the stock of excess savings they accumulated during the pandemic; this could further sustain the recent strength in consumption,” the IMF said this week as it upgraded its outlook for global growth.

Blerina Uruci, chief US economist at T Rowe Price, cautioned that consumer spending could slow in the second half because Americans had spent most of the savings they accumulated early in the pandemic, employment growth is slowing and borrowers with student loans must resume repayments in the fourth quarter.

As labour markets have cooled and wage gains have slowed, some buyers are pulling back on their discretionary spending, from furnishings to hot tubs to luxury goods. 

Some within the travel industry are warning that the industry boom must end. Heathrow’s boss John Holland-Kaye questioned how long people would be able to pay “extremely high” ticket prices. “Our concern is that demand cannot defy gravity forever,” he said.

Additional reporting by Laura Onita and Madeleine Speed in London and Silin Chen in New York

Read the full article here

News Room July 28, 2023 July 28, 2023
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