Inter-island fares in the Canaries are subject to two sorts of subsidy: the discount for residents/large families and a subsidy paid for by the Government under what is called a Public Service Obligation (PSO). However, if you thought that these PSO subsidies meant that the Canaries would enjoy cheaper fares, think again!
This post compares four markets: two from Lanzarote and two between Valencia and the Balearic Islands. Details of the four routes, for the 12 months to November 2013, are shown below.
Table 1 shows the pairs of less busy and busy routes. Note that, although the Valencia routes have a lower demand in each case than the Lanzarote ones, they have twice as many airlines competing on the route. The one way departure figure is the average number of departure per day over the 12 months.
The Valencia flights are run on a fully commercial basis, without any PSO subsidy. The Valencia routes were selected as they have similar characteristics to the Lanzarote ones in terms of distance and demand.
As inter-island fares are used primarily by residents of the Canary Islands, we will focus on residents’ fares
Table 2 shows the lowest fares available on the route and the fares quotes were available within four week of departure, during the last week of January 2014.
Note: prices include all taxes and charges
We can see from table 2 that Ryanair’s 737s, supposedly uneconomic over short routes such as these, is able to charge much lower fares than Canarian operators. Air Europa’s price between Valencia and Palma is similar to Canarian levels but, of course, nobody is obliged to pay the Air Europa fare.
Of course, not everybody is available to book well in advance, so table 3 examines the same routes for more immediate travel, within two weeks of departure.
We see a similar picture as with fares bought further in advance, but the fact remains that travel across to the Balearic islands is 25-40% cheaper than inter-island travel in the Canaries.
Non-resident fares
Table 4 shows non-residents’ fares which are easily available a few weeks prior to departure. It is worth bearing in mind that on two of the three routes, the non-resident fares are cheaper than those available from Lanzarote and the third, flown by Air Berlin, is only slightly more expensive.
Conclusion
We can draw three conclusions from the above analysis:
– Canarian island residents are paying excessive fares for the air services currently provided;
– The subsidies paid through the PSO may help the airlines, but appear to be of little use to passengers;
– The routes from Lanzarote could be opened up to competition. Passengers would benefit and only the incumbent operators would be hit.
