Airfares across the United States have recently dropped to their lowest levels in months, and even holiday travel is significantly less expensive than it was in 2022, providing consumers with some much-needed relief from exorbitant pricing.
The abundance of offers indicates that the airline industry’s rapid COVID recovery may be coming to an end as the supply of tickets comes up with and, in some cases, surpasses the relatively strong demand.
As per the New York Times, Florida-based retired teacher Denise Diorio recently paid only $230 for a round-trip ticket from New York to Paris and back, and spent less than $40 on flights to and from Chicago.
“I’ve been telling all of my friends to get their tickets now if they want to go somewhere,” she remarked.
Around Thanksgiving, the average cost of a domestic flight was approximately 9% less expensive in early November 2023 than it was in 2022. According to the booking and price-tracking app Hopper, flights during the Christmas season were roughly 18% less expensive.
After looking at a wider range of dates, the travel search engine Kayak discovered that domestic flight costs decreased by roughly 18% and 23% over Thanksgiving and Christmas, respectively.
According to Kyle Potter, executive editor of Thrifty Traveler, a travel blog and deal-watching service, “We’re seeing some of the lowest fares that we’ve seen really since travel started coming back after the drop-off in 2020 in many cases.”
During an interaction with the New York Times, Mr. Potter stated that the domestic ticket rates dropped over the summer, and lately, there have been more offers on overseas travel.
When demand for tickets slows down or they face more competition, airlines strive to attract more customers by lowering their fares. While it’s undeniable that competition has increased on some routes, travel experts say it’s unclear if demand is declining.
According to a trade organisation called Airlines for America, Thanksgiving this year is predicted to establish a record for air travel with close to 30 million passengers. That is a gain of almost 9% over the 2022 and 6% over the 2019 stats.
However, several carriers claim that demand is declining outside of the holidays and other high travel times. Carriers have been forced to lower tickets to fill planes at some airports due to an overabundance of flights.
Throughout most of the pandemic’s recovery, that hadn’t been too much of an issue. The number of flights was restricted in 2021 and 2018 due to several problems, including a lack of parts, skilled pilots, and aircraft. This increased ticket costs, maintained plane occupancy, and enabled airlines to turn a healthy profit.
Judging the scenario further
With around 30 million travellers expected, Thanksgiving travel in 2023 is predicted to break a record.
According to John Grant, chief analyst of aviation advice and analytics firm OAG, “The airline industry has never delivered the types of profit margins and return on capital that it has done over the last 2.5 years. The industry is returning to a more typical state.”
The biggest American airlines have been enjoying ongoing success, mostly due to the growing demand for foreign travel. However, low-cost and smaller carriers are beginning to feel the pinch. For the three months that ended in September 2023, a number of them released financial figures that were unsatisfactory.
According to these airlines, costs are still high, demand is waning, and tickets are declining. They also claim that flying has become more challenging due to poor weather and a lack of air traffic controllers.
For instance, JetBlue Airways lost $153 million in the 2022 third quarter, but it made $57 million in profit during the same time frame. The airline is now shifting flights from densely populated areas, like New York, to areas like the Caribbean. Spirit Airlines and Frontier Airlines, two low-cost airlines, recently disclosed to investors their intention to reduce expenses.
In certain significant markets, there has been intense competition, which has lowered prices and profits.
According to aviation data source Cirium, there were approximately 14% more seats available on flights in Denver, the home of Frontier, this summer than there were in 2019. Miami and Orlando, Florida, two popular destinations served by numerous low-cost carriers, saw much greater capacity gains.
However, as airlines chased passengers, they increased flight frequency in key markets, but airport capacity in other locations saw significant losses starting in the summer of 2019, notably Los Angeles, which serves as a hub for multiple major airlines.
Frontier CEO Barry Biffle said, “When you compare where their concentrations are, you’ll find that there’s a large correlation between the airlines that are doing well and the ones that are struggling, margin-wise.”
Analysts are less convinced of the reasons behind the declining fares on international routes and whether they will stay low. The kind of prices Ms. Diorio obtained for her trip to Paris may indicate that the larger airlines are about to face financial difficulties or that the sector is simply returning to pre-pandemic normal.
According to Kayak CEO Steve Hafner, historical data indicates a decline in demand in Europe during the winter, a trend he views as reflective of normal seasonal patterns.
However, there may be obstacles to the desire for international travel, in part due to the conflicts in the Middle East and Ukraine. Analysts caution that compared to the previous few years, when they had considerable savings to draw from, many consumers would be less able or willing to splurge on travel. Airlines run the danger of selling too many seats on well-travelled international routes, even if demand is high.
Mr. Potter stated that regardless of the reason behind the recent decrease in airfare, tourists will appreciate the savings after years of exorbitant costs.
“In any case, the formula for inexpensive flights exists,” he remarked, while adding, “If there is only a slight overcapacity, then customers will benefit. For those who are determined to travel, there may be even greater benefits if the travel demand is declining.”
Meanwhile, Brussels is looking into the recent spike in airfares around Europe, which occurred as a result of airlines raising prices by up to 30% during the summer, which generated enormous profits.
European Union transportation commissioner Adina Vălean stated to the Financial Times that EU investigators were “looking into detail of what is exactly going on in the market and why.”
Although Vălean’s intervention increases pressure on airlines over the recent price increases, which were caused by a travel boom and supply chain concerns, the European Commission does not have the authority to regulate air rates. She stated that she was asking airlines to explain the increase in prices and any potential obstacles to connectivity inside the EU.
According to EU data given in October in answer to a question in the European parliament, average airfares across Europe were between 20% and 30% higher over summer 2023 compared with 2019.
Vălean stated that although the commission required additional information regarding the industry dynamics that had resulted in the higher pricing, she had no plans to interfere with the “functioning” aviation market.
The final call
While the abundance of offers may indicate the end of the airline industry’s rapid pandemic recovery, demand for air travel remains high during holiday seasons. However, outside of these peak travel times, several carriers report declining demand, forcing them to lower ticket prices to fill planes.
While the biggest American airlines continue to enjoy success, smaller carriers are feeling the pinch, and analysts are unsure whether the declining fares on international routes will stay low. Regardless of the reason behind the recent decrease in airfare, travellers can appreciate the savings after years of high costs.