The low-cost arm of the Lufthansa Group may not seem to be currently operating on a low-cost business model. Eurowings announced a fare hike of at least 10% amid the chaos within the German aviation industry resulting in high operational costs and severe staff shortages.

Flying became more expensive

According to the low-cost carrier's Managing Director Jens Bischof, the economies of scale have tipped too significantly. They are not in favor of the aviation industry, which means that Eurowings is facing cost increases of €100 million ($101.8 million) at minimum. Current fare prices are already approximately 10% more expensive compared to prices in 2019, but even this was not enough for Eurowings to break profitability.

With jet fuel being one of the most significant expenses for airlines, the insane rises in oil prices due to the unscaled productions have made it difficult for airlines to maintain lower fares when increasing flight operations. This means that raising the fares by another 10% at minimum seems to be the only practical short-term solution for Eurowings, at the high costs of passengers inevitably.

Bischof also warned that the era of having the privilege to enjoy super-cheap flights was gone and dusted, having criticized other low-cost carriers and their still low-pricing policies by saying:

"Flying is becoming more expensive and must also become more expensive for consumers. Economically and ecologically, it did not make much sense for aggressive competitors to paint a false picture of our industry with air fares the price of a cinema ticket."

A season of cancellations

And if news of a fare hike wasn't enough to dampen passengers' spirits, Eurowings and the rest of the airlines in the Lufthansa Group are carrying out another massive wave of flight cancellations in the coming week, in the wake of its June cancellations. Primary carrier Lufthansa has already removed 900 domestic German and intra-European flights from its Frankfurt and Munich hubs for the remainder of this month. The cancelations affect flights on Fridays, Saturdays, and Sundays, representing approximately 5% of the national carrier's scheduled capacity on the weekends.

As for Eurowings, the low-cost carrier plans to take several hundreds of flights out of its system to stabilize the tourist offer for this month. The cancellations seem unavoidable as Germany faces extreme bottlenecks and shortages of an operable workforce for its aviation industry, but also too high of a jump in passenger volume, which is approximately 90% within a few months. And though Eurowings is seeing an improved decrease in sickness-related absences, airport chaos will ultimately lead to delays and impose legal crew operating limits.

And while the cancellations are currently only expected for July, Bischof further warns that it could extend until August if situations are not improved. He commented:

"Nobody is happy about the image of our industry at the moment -- least of all us. Last-minute cancellations are very clearly on a downward trend, and Eurowings is working around the clock to improve the situation."

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The budgetary line

The substantial hike in fare prices would eventually make the budget airline relatively on almost the same level as Lufthansa Group's leisure airline, Eurowings Discover, in terms of pricing. Should oil prices remain unstable and continuously paired with high demands for air travel, the future of the low-cost business model could look bleaker by the season as fare prices will undoubtedly rise above. The era of extremely low fares may not necessarily be done and dusted as Bischof warned, but it has undoubtedly been swept under the rug for now.

Source: The Local