NEW YORK/LONDON--Transatlantic airfares have dropped to rates last seen before the pandemic, data shows, the latest sign that fewer Europeans are traveling to the U.S. due to concerns about U.S. border controls and President Donald Trump's policies.
The trend could extend into and beyond the summer holiday period, typically the busiest time for airlines and travel companies.
Overseas arrivals to the United States fell 2.8% in May from a year ago, according to preliminary data from the U.S. National Travel and Tourism Office within the U.S. Department of Commerce. Travel from Western Europe fell 4.4% in May, led by a decline in travelers from Denmark and Germany.
Forward bookings suggest sustained declines are on the horizon, with total inbound bookings to the U.S. in July down 13% year-over-year, according to OAG Aviation, an analytics firm.
The decline in demand will add to airlines' financial pain, particularly for European carriers such as Air France KLM and Germany-based Lufthansa. Those airlines are struggling with higher labour costs and oil prices, as well as disruption to flights due to Middle East conflicts, which adds time and costs to routes to and from Asia.
Transatlantic airfare has been declining since the first quarter when Europeans started reconsidering travel to the U.S. after Trump suggested annexing Greenland, launched a global trade war, and issued orders to tighten border policy. A stronger dollar has also deterred some trips.
Average round-trip economy airfares for over 50 routes from the U.S. to Europe in the first quarter were down an average of 7% year-over-year, with rates to fly between Atlanta, Georgia, and London, down 55%, according to data from Cirium, an aviation analytics firm.
As American consumers have been bargain-hunting and waiting closer to their departure dates to finalize travel plans, the decline in demand from Europe is contributing to cheaper travel. This year will be a tougher one for airlines to make money on transatlantic routes, with fewer seats being filled by European travelers and slower growth in U.S. outbound travel to Europe than last year, said Aran Ryan, director of industry studies at Tourism Economics, a subsidiary of Oxford Economics.
This summer, the price of round-trip tickets from the U.S. to Europe is down 10% from a year ago, travel booking app Hopper said. Average fares of $817 per ticket are in line with prices to Europe in the summer of 2019 before the pandemic.
Major carriers expect slowing activity. Lufthansa CEO Carsten Spohr said the company expects weaker demand in the third quarter after a boom in the summer, while Air France KLM CEO Ben Smith said the company is seeing a "slight pullback" in transatlantic traffic and will slash prices to keep cabins on its transatlantic flights full.
Travel to the U.S. in May from Denmark, Germany, and France fell 20%, 19%, and 9% respectively. In March, Germany updated its travel advisory for the U.S., emphasizing that a visa does not guarantee entry.
