Following the introduction of Europe's new currency, the question being asked in the travel industry circles is what impact the euro will have on prices.
There are immediate benefits of the euro, such as the elimination of exchange rate risk, but what about fares? Travel agents, tour operators and other travel purchasers say the euro is revealing "anomalies" previously hidden by exchange rates - difference in prices between the same two destinations, depending on where and when the flight starts.
Richard Dickinson, vice president of policy and communications at the World Travel &Tourism Council, says greater price transparency "may" help buyers put pressure on airlines to eliminate country-specific price differentials, but Europe's carriers are in no mood to abandon their increasingly sophisticated yield management systems.
"We sell different products in different markets against different fares. We still have to deal with different costs," says Rene Vanden Polder, euro project manager at KLM. "You can't buy a stamp in France and stick it on a letter you are sending out of Amsterdam," he says, adding that the US market shows that goods and services will continue to be sold at varying price levels despite being denominate in the same currency.
KLM acknowledges, however, that the ability to directly compare fares, accentuated by the growing use of the Internet, will increase competition, driving down yields ever faster.
James Halsted, analyst at Banque Indosuez, says that the euro in itself will make "no difference to prices", while Matthew Stainer at Credit Lyonnais Securities says he "-can't see the euro having a big effect on the trend towards price divergence".
Source: Airline Business
