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An End for the Budget Traveller?

Aug 5, 2008
As the effects of escalating oil costs continue to affect industries across the board, the credit crunch looks set to hit the consumer hardest once again.

Ryanair are the latest company to reveal the extent of its financial hardships, with annual losses expected to approach GBP50 million. In fact, in the three months to the end of June, the carrier's net profits had fallen a staggering 85% to just 21 million euro.

With the significant increases in the price of oil over the past few months - a figure which saw it reach a peak in mid-July of nearly $150 per barrel - an announcement such as this was somewhat expected; only the extent of the losses came as a surprise.

Following the announcement from Ryanair, shares in the other exponent of budget flight - easyJet - plunged 8%, while British Airways suffered a drop of 5% in value. Those to suffer the most from the decline in fortune, however, look certain to be those travellers looking to take advantage of the great-value flights on offer.

With a view to curb losses, it is inevitable that profits will require a substantial boost from the raising of ticket prices. So is it time for the average traveller wave goodbye to those 1p fares? And if so, what will the affect be on the travel industry?

Many elitists - not too mention tourist destinations - may well greet the news of a reduction in budget flights with glee: at last the beautiful cultured streets of Europe will be free from drunken stag weekenders and hen parties, while the golden beaches of the Costa Blanca will no longer be inhabited by lobster-like British bodies.

However, tourism remains the lifeblood of many a destination, and a significant drop in visitors may lead to a host of problems caused by depleted funds. As a consequence, the need to welcome those budget travellers far outweigh the wish to keep them out.

It seems almost certain that the days when flights are sold for a penny apiece are gone. So will the immediate problems being suffered by the likes of British Airways, easyJet and Ryanair prove long-standing, or is there a glint of optimism on the horizon?

Thanks to the realisation that the over-inflated oil costs are in part due to the Organisation of Petroleum Exporting Countries' (OPEC) reticence to export oil at a reasonable rate, and in part due to greedy traders profiting on the New York Mercantile Exchange (NYME), oil has begun what many hope to be a steady downturn. Should this be the case, it it plausible that the airline prices may decrease once the price of oil steadies.

In the meantime, however, it seems likely that the next 12 months at least can see potential travellers wave goodbye to their much anticipated holiday.
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