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Summer airfares from Europe to US drop to pre-pandemic

levels

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Western Europe travel to US declines, Eastern Europe

travel

rises

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Airlines adjust strategies amid changing transatlantic

travel

demand

By Doyinsola Oladipo, Joanna Plucinska

NEW YORK/LONDON, June 18 (Reuters) - 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 labor 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.

Lufthansa and U.S. air carrier United Airlines say

higher demand from U.S. travelers flying to Europe is offsetting

the decline of Europeans flying the opposite direction. United

said international bookings from Europe fell 6% in the first

quarter, but added that U.S.-originating demand made up for the

pullback. Rival Delta Air Lines ( DAL ) said 80% of its

long-haul international demand originates from the U.S., and

fares in the region are "significantly higher" than in the rest

of the world.

Lufthansa said it plans to market its transatlantic flights

to more Americans, given the higher demand, despite travel from

Western Europe showing moments of recovery. Travel from the

region to the U.S. increased 12.1% in April before falling again

in May, according to data from the NTTO.

As of mid-May, there are 4.3% more international flights

scheduled to depart from U.S. airports for international

destinations this summer, said Hopper.

"We feel really good about the transatlantic market,"

American Airlines CFO Devon May said at a Wolfe Research

transportation and industrials conference in May.