Airfare to Britain Plummets to Lowest Level in Three Years - Hopper Research

Airfare to Britain Plummets to Lowest Level in Three Years

Patrick
By Patrick Surry
Posted Jul 7, 2016

Summary:

  • There was a significant increase in search demand for flights from the US to Britain in the days following the Brexit vote on Thursday, June 23, peaking by Friday, July 1. London and Edinburgh airports saw more than a 50% increase in search demand.
  • Airlines began reducing prices by 10-15% to destinations in Britain and Europe on Tuesday, June 28, for flights originating in the US. These are the lowest prices we've seen to Britain in the last three years. We rounded up some recent deals here.
  • The UK pound has fallen to its lowest level since the mid-1980s, recently trading below $1.30, which will make the UK more attractive for tourists, with the dollar stretching further.
  • Additional border controls would make London less attractive as a European transit hub, which along with a cheaper pound easing local operating costs, could lead to even lower fares to Britain in the medium term.
  • In the long run, British exclusion from European Open Skies Agreements would reduce competition and put upward pressure on prices within and to/from Europe. Travelers have been enjoying the benefits of vigorous competition to UK and European markets from international low cost carriers such as Wow air, Norwegian, and Turkish airlines.

Search Demand Since Brexit

Figure 1: Change in search demand the week after Brexit for large airports in the UK and Europe to and from the US.


We saw a big increase in search from the US to British destinations, plus Dublin (pink bars). Flight search demand from the US to London spiked by 57%. There were smaller changes in search volume for trips from Europe to the US (blue bars). Interest peaked within a week, and has begun falling back to normal levels.


Table 1: Changes in search volume for major European airports in the week following the Brexit vote.

Figure 2: Detailed view of relative search volume in the days after the Brexit vote.

Price Changes Since Brexit

Figure 3: Price changes since the Brexit vote.

When Brexit was first announced, there was no impact on flight prices. On Tuesday, June 28, airlines began discounting flight from the US to Britain and Europe by 10-15%. In fact, these are the lowest prices we've observed in our three years of historical data. We don't have data to confirm this, but we suspect these prices may even be the cheapest fares to Britain since 2010 because prices were stable and oil prices were high then.

Figure 4: US to London historical price trend.

It's typically cheaper to fly from Europe to the US than it is to fly from the US to Europe. This price cut now evens it out though. Brexit has not had the same impact on flights from Britain and Europe to the US.

Discounts are Europe-wide, not just to the UK so we don't think the low prices are because Americans will want to take advantage of the discounted pound. Europe and the UK has had a lot of negative coverage in the last year (refugee crisis, terror attacks, Greek crisis, etc.). Brexit was likely the final straw and airlines are likely concerned that uncertainty and trepidation will reduce overall demand. It's also possible that airlines have already been seeing weak demand for the peak summer season, and want to get ahead of that. Some travel organizations like Thomas Cook and Ryanair have pointed to soft demand for this summer.

Additional border controls would make London less attractive as a European transit hub, which along with a cheaper pound easing local operating costs, could lead to lower fares to the UK in the medium term.

In the long run, British exclusion from European Open Skies Agreements would reduce competition and put upward pressure on prices within and to/from Europe. Travelers have been enjoying the benefits of vigorous competition to UK and European markets from international low cost carriers such as Wow air, Norwegian, and Turkish airlines.


Table 2: Round-trip airfare price changes for major European airports in the week since Brexit.

Figure 5: Round-trip airfare changes from a typical US origin to Europe since June 23, based on a one-week rolling average. Airlines began discounting by 10-15% on June 28.