Airfares have plateaued but will not come down because of increased operating costs, according to the chief commercial officer of Virgin Atlantic.
Speaking at the 2024 Travel Weekly Future of Travel Conference, Juha Järvinen said it had been an “exceptionally good year” for the airline – despite “some ups and downs” – with overall revenue up 6% versus 2023 and record operating EBIT (earnings before interest and taxes).
He attributed this to corporate demand continuing its recovery and “strengthening interest” from the US market to the UK, partly due to people in America attending the 2024 Summer Olympics in Paris.
In a panel discussion on summer operations and the future outlook, alongside Royal Caribbean vice-president for Europe, the Middle East and Africa Gerard Nolan and TTC sales director for the UK, Ireland and Europe Kelly Jackson, Jarvinen blamed rising air fares on increased operating costs.
“All the elements of travel have gone up and that applies to us in terms of salary costs, supplier costs and everything else,” he said, adding: “That in turn means air fares have gone up.”
Jarvinen said the hike in air fares was not bolstering the airline’s coffers but instead covering the uplift in outgoings.
“It’s not like we’ve been cashing in from this; it’s literally the cost of production now. Everyone knows how tight the margins are,” he told attendees.
Jarvinen added that while he believes fares have “plateaued”, he does not expect them to fall.
“We do believe we have reached a plateau – looking at the softness in UK consumer demand to the US in Q2, there is a limit to how much prices can go up,” he said.
“But we do not believe the fares can go down because costs in the ecosystem have gone up and there are costs involved with becoming more sustainable.
“Many airlines will agree the increased costs of travel are here to stay.”
Nolan told attendees that increased costs had “affected consumers’ decision in where they travel to”.
He said: “It’s therefore about trying to plan further ahead and think about where we’ll need the added lift.”
He added the line hopes to “hold costs” as much as possible by combining cruise with land-based elements, which is why it is launching two private beaches next year – Royal Beach Club in Cozumel and Royal Beach Club Paradise Island in The Bahamas – which will join Perfect Day at CocoCay and Labadee in Haiti.
“There’s such a wealth of opportunity on land that we haven’t introduced to cruise yet,” said Nolan, who replaced Ben Bouldin in August.