Recently, two French airlines ceased operations. Aigle Azur and XL Airways faced tough financial outlooks which led to their demise. Now that these two airlines have left the market, could Air France increase fares due to decreased competition? As the market consolidates around dominant players, Air France could reap the benefits.

Could Air France increase fares?

From a purely economic standpoint, Air France could indeed increase its fares as it now has two fewer competitors to deal with. Passengers who might be concerned about another airline collapse could be willing to spend additional money on an airline with a more solid financial footing. With three high-profile collapses, it is not impossible to imagine a scenario where passengers start to value more well-known airlines. 

Air France also did not take over either Aigle Azur or XL Airways amid their demise. This could work out for the best on Air France's part. Since the French flag-carrier did not acquire any additional aircraft, this means that not only are there fewer airlines operating, but also fewer aircraft operating. This, in turn, means that there are fewer seats available in the skies. Should there still be demand on key routes, Air France could thus charge more amid decreased supply.

Why Air France might not increase fares

On the other hand, Air France has done well so far in 2019 according to its first-half of 2019 operating results. Its load factor hit a healthy 87.5%; rarely in the aviation world do large airlines post load factors close to 100%.

So, while there are fewer carriers, Air France might see value in boosting its load factor rather than driving up fares. In an ideal simulation of both situations, this would lead to increased revenues for the airline. Whether Air France sees a significant impact, however, is a different story.

Overall

For passengers, the lack of options to get from point A to point B can be frustrating. On the other hand, some airlines – and possibly some jobs – do stand to benefit from decreased competition and increased fares.

However, the response of airlines currently in the market can tell a lot about the strength of the market. If Air France does not increase fares, it could be that the airline does not feel confident in filling their aircraft– especially as the northern winter season approaches.

Perhaps, Air France could strike a middle ground. On some key routes, it may be wise for Air France to increase fares while, in other cases, they may choose to increase capacity.

Do you think Air France will or should increase fares? How do you think Air France will respond to recent events? Let us know in the comments!