Finding cheap airfares proved to be a difficult task for many travelers this year. Unfortunately, experts predict the trend to continue until next year.
Airlines blame several factors for increasing the prices of their tickets. Among them include high fuel prices, inflation, and limited available seats for consumers. In addition, airline managements have no choice but to shoot up the cost due to staffing shortages, limited flight schedules, and delays. However, travelers still do not hesitate to buy tickets even with these.
“Holiday flights are going to be expensive once again. The pricing power has shifted back to the airlines for winter holiday travel,” said Scott Keyes, the founder of Scott’s Cheap Flights.
Hopper, a fare-tracker firm, saw a major spike in domestic airfares last May. However, the increase in costs is higher than last year. When comparing the prices last year, Hopper reported a 19% average airfares to increase to $274. Meanwhile, the domestic roundtrips rose 40% to $390 this year.
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Airlines’ windfall cause airfares to increase
Delta, American, and United, considered the three biggest US airlines, remain profitable despite the worsening inflation in the country. In fact, all of them recorded record-high revenue and profits during the third quarter of 2022. Market analysts expect the airlines to continue their streak as the holiday season nears. And this trend comes without decreasing the cost of airfares.
According to experts, airlines are now maximizing the revenue streak due to the massive losses they incurred during the Covid pandemic. Airline companies recorded a historic loss in light of the global lockdowns. It also pushed many to file for bankruptcy or temporarily shut down. In addition, many airline workers quit their jobs as companies could no longer sustain operational costs.
“With hybrid work, every weekend could be a holiday weekend. That’s why September, a normally off-peak month, was the third strongest month in our history,” added the CEO of Unites, Scott Kirby.
“If you go look at our Thanksgiving schedule right now, there’s less peak-to-trough variability there than certainly, I’ve seen in the schedule for a number of years,” said Vasu Raja, the chief commercial officer of American.
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Limited seats available
Delta, one of the leading airline companies in the US, plans to fully revert to its 2019 capacity, but it will not happen soon. Meanwhile, by next year, American projects to restore over 95% to 100% of its seating capacity. As a result, the three leading airlines said they would decrease the seating capacity of their planes by as much as 10% for the fourth quarter. And this is what is driving airfares to increase.
“It shows you customers want to treat themselves. I think that’s a phenomenon that continues not just now,” said Robert Isom, the CEO of American.
Booking early
Keyes, Scott’s founder of Cheap Flights, advised travelers to book ahead of the peak season. People get to prevent high airfares and fully booked flights by doing so.
“When you are opening your Christmas presents, ideally, that’s when you should be thinking about booking those summer flights,” he said.
“You can make your plans in pencil rather than in pen. Last-minute fares tend to move in one direction, and it’s not down,” Keyes added.
Photo Credit: Mario Tama
Source: CNBC
Opinions expressed by CEO Weekly contributors are their own.
