Brussels probes flight prices after airlines’ record-breaking summer

Today’s top stories

• UK prime minister Rishi Sunak will announce new legislation in the King’s Speech tomorrow to mandate annual North Sea oil and gas licensing rounds.

• US Treasury secretary Janet Yellen is set to meet China’s vice-premier He Lifeng in San Francisco this week ahead of a summit between the countries’ leaders at the Asia-Pacific Economic Cooperation forum. On the agenda are US concerns about unfair Chinese economic practices as well as potential areas for co-operation such as climate change and debt relief for low-income countries.

• The “friend-shoring” trend of multinationals shifting production to politically friendly countries is gathering pace, according to the European Central Bank, but is also pushing up prices.

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Good evening.

Record airline profits and a warning from Brussels about soaring fares are the latest evidence, if any more was needed, of the spectacular bounceback in air travel since its pandemic lows.

Ryanair, Europe’s largest carrier by passenger numbers, today announced plans for a regular dividend for the first time on the back of what it forecasts to be record annual profits.

Rivals including British Airways owner IAG, Lufthansa, easyJet and Air France-KLM have all recently reported similarly booming profits from a summer of huge demand and high ticket prices.

It is these surging ticket prices — rising up to 30 per cent — that have prompted the European Commission today to announce its officials were “looking into detail . . . of what is exactly going on in the market and why”. Brussels does not have the power to regulate airfares but the intervention adds to pressure on airlines over the recent rises, triggered by supply chain problems and booming demand.

The boom also means good business for the $110bn a year aircraft repair and maintenance market. The shortage of new planes means airlines are spending more than ever on keeping their aircraft in the air. “I’ve been at the company for 34 years and I have never seen a demand environment like we are in today,” said the boss of one replacement parts company. 

Aircraft rental costs are also soaring as the industry struggles with manufacturing delays, leading to older aircraft flying for longer as airlines extend leases. Airbus and Boeing have record order backlogs, while problems such as a recall of more than 1,000 Pratt & Whitney jet engines have added to strains in the industry.

Airports are the other big beneficiary. London Heathrow has sharply cut its losses and raised passenger forecasts after an “extraordinary” summer, with particularly strong demand from long-haul markets, including Asia-Pacific, where traffic has recovered to 94 per cent of pre-pandemic numbers following the reopening of many borders earlier this year. 

One downside for airlines flying through UK airspace is a large rise in air traffic control fees, which the head of sector body Airlines UK said would inevitably feed through to ticket prices.

The increase in flying inevitably comes at a cost, with concern about its impact on the planet entering a new phase. And until such time greener aviation fuels and technologies take off, it remains a highly polluting industry. A round-trip flight from London to San Francisco, for example, emits more per person than a car does in a year. 

But, as the FT editorial board has noted, the drive towards more sustainable travel cannot be left to flight-shaming and climate-conscious backpackers: ultimately it will come down to concerted action from governments, industry, and international bodies.

Need to know: UK and Europe economy

The UK said it would bring stablecoins — a type of digital token designed to track the price of hard currencies — into the real economy as a payment option for goods and services. The move is the latest step in the country’s attempt to establish itself as a hub for digital assets amid concerns that Brexit has damaged its position as Europe’s leading financial centre.

UK housebuilding activity shrank for the 11th consecutive month as high borrowing costs hit demand, according to new S&P Global PMI data.

Denmark’s climate minister told the Financial Times that EU farmers should pay for their greenhouse gas emissions. The sector is projected to become the bloc’s biggest polluter by 2040.

An economy falling behind the US, an unsatisfactory performance in sectors such as tech and semiconductors, and longstanding structural issues mean the EU needs to regain its competitive edge. A Big Read examines how it plans to do it.

Need to know: global economy

Israel’s $488bn economy is suffering badly under the impact of the war, with businesses disrupted, public finances strained and entire sectors in crisis. Prime minister Benjamin Netanyahu has promised vast transfers of cash to endangered companies and regions on a scale last seen during the Covid-19 pandemic.

An unprecedented drought in the Amazon rainforest region has extreme implications for the planet’s climate. As extreme heat and water shortages kill trees and spark fires, the forest releases carbon dioxide, fuelling the process of global warming that scientists say is an important factor behind the drought in the first place.

Bill Gates is the latest interviewee in our Climate Exchange series, explaining the rationale for his Breakthrough fund investments in more than 100 nascent climate tech companies.

Join us on November 8-10 to discuss the global implications of the Israel-Hamas war and other big issues, with guests including the president of the European Central Bank, at our Global Boardroom event. Register for free today.

Need to know: business

A total of 127 companies have voluntarily admitted breaching UK sanctions against Russia to reduce government penalties. The UK has placed more than 1,600 individuals and companies under sanctions since Russia’s full-scale invasion of Ukraine with a moratorium on entities dealing with more than two dozen banks and more than 100 oligarchs.

Elon Musk’s artificial intelligence start-up xAI released its first AI model, a chatbot named Grok, tightly integrated with X, formerly Twitter.

The world’s most prestigious consulting firms have frozen US starting salaries for new graduates, as a war for talent that sent pay soaring after the pandemic gives way to tougher competition for jobs.

The battle for the future of car manufacturing is heating up as Toyota battles to catch up with Tesla on the assembly line in a new era of electric vehicles. Volvo Cars is considering increasing its US production to take advantage of green incentives from US president Joe Biden’s Inflation Reduction Act.

The post-pandemic rebound in gigs and hospitality has driven global music copyright revenues to $41.5bn. Thanks to streaming services such as Spotify, subscription models now make up more than 62 per cent of all global recorded music revenues.

The party’s over: US demand for cognac has slumped after a three-year boom. The French groups that dominate the market — LVMH, Rémy Cointreau and Pernod Ricard — each reported declining sales in third-quarter earnings reports, matching the downturn in the broader market for luxury goods.

The world of work

UK tax experts warned that the self-employed were “sleepwalking” to tax bill shocks after a change from HMRC on reporting profits.

A large study from BlackRock suggests that gender-balanced companies outperform their peers. The higher return on assets held true within countries and sectors, and was especially marked for companies where gender parity was greatest in revenue-producing, engineering and top-paying jobs.

Socio-economic background is a greater block to career progression than gender and ethnicity, according to recent research, with working-class women suffering a double disadvantage.

The percentage of businesses founded by people aged 55 to 64 has increased steadily over the past few years. Research suggests experienced founders are more likely to succeed, despite the prejudices of investors.

Benefits have overtaken pay as the key to hiring and keeping staff in the UK. Read this and more, including the evolving role of jobs websites, in our new special report: The UK’s Leading Recruiters.

Some good news

Data on the first month of the London-wide ultra-low emissions zone shows it has cut the number of polluting vehicles on the city’s roads by almost half since June. About 95 per cent of vehicles driving in London on an average day now meet the Ulez emissions standards.