Understanding Inflation Trends Through Air Transport Prices: Germany vs. France

Passenger air transport plays a crucial role in forecasting inflation but - when it comes to Consumer Price Indices (CPI) - the truth is often in the detail. Yesterday's Eurostat data is a prime example, revealing intriguing inflation dynamics when we dig into the figures for France and Germany.

In Jan-25, Germans experienced a significant year-on-year increase of 12.7% in airfares, while France saw a 2.5% decrease. At first glance, these numbers suggest that air travel prices are soaring in Germany but falling in France.

However, when we compare prices from Jan-25 to pre-pandemic levels in Jan-19, the trends change: Germany’s airfare inflation over this six-year period is 23.9%, while France’s is a much steeper 41.2%. This means that, in the long run, prices have risen significantly more in France than in Germany - despite the short-term slowing in air transport price rises this year.

So, what’s driving these differences?

Demand Dynamics: A strong post-pandemic rebound in travel demand will naturally have driven prices up in France. On the other hand, possible capacity constraints at Lufthansa and high location costs - as cited by Fraport CEO Stefan Schulte in 4Q24 - may be behind a slower recovery in the German air transport sector, leading to a more moderate increase in prices since 2019.

Regulatory Impact: In recent years, France has implemented policies such as its ban on short-haul flights, carbon taxes and stricter aviation regulations, which have added upward pressure on air travel prices. Germany, however, has been more conservative in such approaches, mitigating price increases in the air transport sector.

As economists and analysts, understanding these nuances helps us to refine our inflation forecasts, especially when passenger air transport is such an important early indicator. If you're interested in how these insights can inform your forecasting, get in touch with us today!