Europe Airlines Increase Supply to Drive Up Demand

This weekend, the Group of Seven (finance ministers from Canada, France, Germany, Italy, Japan, the UK and the U.S.) met in Rome to discuss the current economic crisis, and predicted a dire few years for Europe’s economy. The meeting failed to accomplish much, and the euro and pound continued their freefall. Europe’s stock markets sank even lower on Monday morning after a gloomy report from Moody’s Investors Service that stressed the dangers to Eastern European countries if their Western neighbors don’t help.

The most basic rule of economics, after all, is supply and demand. As long as these are kept in balance, there is economic harmony and all is well in the business world. The balance can even shift a little in favor of demand without too much of a crisis. But in today’s economy, the demand for goods and services has plummeted, becoming a self-perpetuating downward spiral. People are afraid to buy, and the value of products (and services) goes down.

But in some cases, increasing the supply can increase the demand, especially when the price is right. In the past few months, several European airlines have increased service around the globe, offering either new routes or more flights to different destinations. As 2009 progresses, travelers will have greater opportunities to travel to Poland on Lufthansa; Madrid on Air Europa; London (from Tel Aviv) and Kiev (from London) on bmi; London (from Sydney) on Quantas; and Lisbon on Azores Express.

In addition to increasing their supply, some airlines are offering air-inclusive deals and value-added packages to Europe. Deals are always in demand, and when a price becomes too good to pass up, the demand will increase. The decline of the pound and the euro have made many nations more affordable than ever, and this may well be the best chance to book a trip before they start to rise again.

Time will tell if the increased services and packages will help drive up travel to Europe, but by making it easier—and more affordable—for people to get there, Europe’s airlines have taken a good first step towards increasing demand for a trip.

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