OPERATORS have been left with two stark choices after
the war started in Iraq this week – cut capacity further by grounding aircraft
or slash prices to the bone.

The big four have warned of an immensely tricky
post-war situation depending on capacity left and consolidation in the market.

Sources claim operators would struggle to cut capacity
further – the big four have already cut up to 15% from their May and June
programmes – without taking aircraft out.

One warned: “You could get to the point where it is
cheaper to leave aircraft on the ground but that has its own cost implications
and there are still bed guarantees to pay for.”

The alternative view is it is better to sell seats at
any cost. This could see a price war as operators drop package prices in the
run-up to summer in a desperate bid to sell off their fixed capacity stock for
high season. Prices have already come down for the peak Easter period.

Thomson national sales manager retail Jeanne Lally
said it had no plans to cut capacity or prices further and it would be business
as usual if there is a quick resolution. But she added: “If the war drags on,
we may have to reassess the situation.”