Two Irishmen and an Englishman go to Brussels.
That isn’t the start of a joke: it’s what happened on Thursday this week, at the annual Airlines for Europe summit in the Belgian capital.
The Irishmen each have decades of experience in aviation: Willie Walsh, director general of the International Air Transport Association (Iata), and former boss of British Airways, has been in the industry for 47 years.
Michael O’Leary transformed a small and failing Irish airline called Ryanair into Europe’s biggest budget carrier, and has spent 32 years as CEO.
The Englishman is Kenton Jarvis, chief executive of easyJet. He has been part of Britain’s biggest budget airline for a mere five years, but spent the previous 17 working for Europe’s biggest holiday company, Tui.
In total, that’s over a century of experience between them to draw upon as they navigate their organisations through the latest tumult to assail the airline business. What will it mean for passengers? They have been sharing their thoughts with me.
First, Michael O’Leary. How does the current crisis compare with others during his tenure at Europe’s biggest budget airline?
“I think it’s one of the smaller, more minor ones at the moment. It’s not as significant as 9/11 or the Gulf War. But that depends on how long it continues. Most of the markets think it will last another four or five weeks. If that’s correct, then I think everything will return to normal pretty quickly.”
Yes, but what about those reported fuel shortages? “Jet fuel is pretty secure for the next three or four months, as long as the war ends reasonably quickly: March, April, May timeframe. We don’t think there’s any risk of disruption to jet fuel.”
Kenton Jarvis is more cautious: “On supply, we are dependent on a limited number of refineries globally – particularly in the Gulf. The Kuwaiti refinery is very important for the UK, which imports 80–90 per cent of its jet fuel.
“If the crisis continues for four months, there could be supply impacts. But right now, we’re in constant contact with airports and fuel suppliers and have no immediate issues – not next week, nor the week after. Beyond that, no one can guarantee anything.”
The easyJet boss, though, does predict fare rises: “My expectation is that prices will go up. As a low-cost carrier, we won’t add a fuel surcharge – we won’t suddenly say, ‘here are our prices, plus another €10’.
“Instead, it comes through supply and demand. As others raise prices, that feeds into systems and algorithms, which also push prices up.
“The industry has no choice. It’s a low-margin, highly competitive sector. We make about £7 per seat. If fuel goes up £10, you have to respond.”
Surely, though, that will diminish demand? The Iata leader does not agree.
“We’ve seen these oil price levels before,” says Willie Walsh. “Back in 2008, for example. What caused losses then wasn’t just fuel prices, but the collapse in demand after the financial crisis.
“Right now, we’re not seeing demand collapse. We’re seeing demand shift. Eastern destinations may weaken, but demand is moving toward Western Europe and North Africa.
“Historically, when ticket prices rise, people still travel – they just adjust behaviour. Instead of a week away, they might go for five days; instead of a three-day weekend, they might go for two.
“The broader impact comes from rising fuel costs affecting everyday spending. If people are paying more for petrol, that reduces disposable income for holidays.
“That said, travel demand has remained resilient – even through the cost-of-living crisis. ‘Revenge travel’ hasn’t really faded. People still see travel as a priority.”
Kenton Jarvis of easyJet concurs: “Planes are still full, and people are still travelling. March bookings were strong, and near-term plans remain unchanged.
“What happens from April to September depends on how long the crisis lasts. Historically, demand dips for around six weeks before recovering – often stronger than before.”
With the Gulf states being on the Foreign Office no-go list, and their airlines struggling even to bring their planes back from overseas, Europe looks a safe haven for holidaymakers. There could even be some bargains, the airline CEO believes.
“We’re working with tourism ministries and hotels to support demand through pricing and incentives.
“Overall, the situation is stabilising and adjusting to a new normal,” concludes Kenton Jarvis. But right now, that “new normal” is as opaque as the clouds that welcomed me to Brussels.
Read more: 11 questions and answers about travel during the Gulf crisis
