Airfares across the country soar as summer travel season arrives | North West
After being mostly grounded for two years, Americans have been scrambling to book summer flights this year – and are paying sky-high prices for their tickets.
Airlines plead an imbalance between supply and demand. A shortage of pilots. Soaring kerosene prices. These factors are real.
Yet airline analysts now see something more deliberate at play.
As people have begun to balk at the exorbitant prices and some abandon flight plans, demand has waned. The airline’s response is not to lower fares, but to keep them high by further reducing the supply of seats.
“They’re starting to see some resistance from travelers to pay those fares,” said George Ferguson, senior aerospace and airline analyst at Bloomberg Intelligence. “At that point, you either lower the fares and fill the planes, or you keep the fares high and start cutting capacity. So we’ve seen them cut capacity.”
In short, airlines continue to cut schedules in July and August, not necessarily because they don’t have enough pilots, but partly to keep ticket prices high and maximize profits.
“They know how many drivers they have to fill that schedule. And they’re still cutting,” Ferguson added. “The shortage of pilots is a bit of a convenient excuse here. I think they can’t fill the planes at the fare levels that they’re offering. And so instead of cutting those fares and cutting their profitability, they’re cutting schedules .”
A recent economy class ticket from Seattle to New York cost just over $1,000. A nonstop trip from Seattle to Cincinnati costs $1,300. And Seattle-Los Angeles will cost between $400 and $500.
For many, high prices significantly increase the cost of vacations. For those who need to travel on short notice, perhaps for family reasons, it may not be a matter of choice.
In a country as large as the United States, with few practical alternatives for longer journeys, the air network is a vital part of the country’s transport infrastructure, the price of which is now beyond the reach of many people. .
Airline industry analyst and consultant Bob Mann said that without all the pent-up travel demand, “there’s no way anyone is buying travel at these prices.”
“There’s a view that because there’s an increase in demand, airlines think they can charge whatever they want,” he said.
“Breakfast” tariff inflation
The air transportation system in the United States is clearly under strain, plagued by flight delays and cancellations that cause enormous inconvenience and often significant additional expense to travelers.
In April and May, Alaska Airlines did not have enough pilots to meet its schedule, resulting in hundreds of canceled flights. As it struggled to cope, the Seattle-based carrier cut its schedule by 10% during that month.
Over Memorial Day weekend, Delta suffered a larger slump, canceling more than 700 flights or 7% of its schedule. It cut 100 daily flights until early August.
Hundreds of thousands of passengers have had their travel plans massively disrupted this year. Yet even as the quality and reliability of America’s air travel system has fallen disastrously with no relief in sight, ticket prices have soared.
According to data compiled by Bob Harrell, who tracks airfares for travel industry analysts through his consultancy Harrell Associates, average leisure fares last week were 41% higher than for the same week a year ago.
Compared to the pre-pandemic period, the price spike is even greater. Data from Harrell over a five-week period in March 2022 shows average leisure fares were 52% higher than in the same period before COVID 2019.
“It’s mind-boggling,” said Henry Harteveldt, travel industry analyst at Atmosphere Research. “I’m very concerned that we’re reaching a tipping point and consumers are just going to say enough is enough. They’re just going to cut back on their trips.”
Airline revenues rise after long drought
The pandemic explains part of the price compression.
During the historic air transport downturn of the past two years, airlines have had to significantly reduce their schedules and staff. Now, with labor shortages – including pilots, flight attendants, baggage handlers and call center agents – airlines have yet to fully bring back staff or flights.
So there are fewer airplane seats available today than before the pandemic. Delta’s seat capacity in July is 85% of what it was in July 2019.
“You’re squeezing a lot more people into a much smaller capacity,” Harteveldt said.
Another factor is the surge in jet fuel prices since the Russian invasion of Ukraine. The price of jet fuel is double what it was a year ago.
Alaska Airlines, in a filing this month, projected that despite a fuel hedging strategy to mitigate rising costs, it will pay 60% more for jet fuel this quarter than it did in the same period in 2019.
And after two years of dark red ink and piled up debt, US carrier CEOs are seizing the opportunity to recoup some of their massive losses.
At an investor conference this month hosted by Sanford Bernstein, Delta CEO Ed Bastian said “the demand is out of this world.”
“It comes with leisure, it comes with high-end consumers. It comes with business, it comes with international,” he said. “We expect prices this summer to increase probably between 25% and 30% on average. We’ve never seen anything of this magnitude.”
At the same conference, American Airlines CEO Robert Isom said the carrier maximizes revenue by not selling all of its seats months in advance, but keeping many of them open for passengers buying tickets closer to the flight date at higher prices.
“We’re doing a great job of making sure there’s still plenty of capacity to buy most likely at higher prices,” Isom said. “We are able to book enough (seats) to ensure we can take advantage of tighter demand.”
A difficult summer to travel
Ironically, the service passengers pay more for has never been worse.
Mann notes how the service has deteriorated over the years to the point that the airline industry is now virtually self-service.
“You make your own reservations, your own boarding passes. You make your own expense purchases. You do your own check-in and you get your own stuff on the plane,” he said. “Sometimes you’re even charged for doing all of these things, in addition to doing them yourself.”
At best, at least the trip can go smoothly. But this summer, prepare for a tougher trip.
Mann predicts that when crews reach their federally mandated flight limits each month, perhaps exacerbated by weather disruptions or COVID outbreaks, airlines won’t have enough spare pilots to cover additional flights, as happened in Alaska.
“I can roughly predict that at the end of every calendar month, the last four or five days will be very difficult operationally,” he said.
He added that while carriers have voluntarily reduced their schedules, airline insiders he spoke with fear what lies ahead this summer.
“They don’t have any confidence in being able to run a program that’s reliable enough that the system just doesn’t crash,” Mann said.
Harteveldt agrees it will be “a really tough summer for people to travel.” In the event of cancellation, it will be difficult to find free seats on other flights to rebook stranded passengers.
“Almost all the airlines are full,” he said. “If something goes wrong, there’s just less room for the industry to recover.”
“The travel industry is doing a lot to piss off travelers this summer. And it’s not just the airlines,” added Harteveldt. “Hotels have reduced service. Car rental companies are taking reservations and then telling people who show up, no, we don’t have a car for you.”
after labor day
A reaction to high prices has already set in.
Harteveldt said his contacts in airline reservations departments are “starting to see a slight slowdown in booking speed.”
Coast-to-coast airfares of $1,000 or $1,500 “are a big detour for many consumers, especially people traveling at their own expense,” he said.
Mann said airlines must be careful not to force a change in travel patterns that would destroy current demand.
“A lot of people will say, ‘Gasoline prices are high, but if I get in the SUV and even if I pay the tolls and drive six or seven hours, it’s really not that bad'”, a- he declared.
Airlines will realize this sooner or later, he said.
“They drink their own Kool-Aid for a while…so they keep charging those prices until people say no,” Mann said. “Then they realize, ‘wow, wait a minute, we may have overstepped our bounds here.’
“Yes, there is an imbalance between supply and demand, but not to that extent,” he said. “We can’t jack people up 30, 40, 50 percent on price and not get a demand destruction response.”
A silver lining: airlines are unlikely to be able to keep prices high at the end of the summer.
“When the economy sneezes, the travel industry catches a cold,” Harteveldt said.
With consumers battered by inflation in nearly every spending area and concerned about a faltering economy, once already-booked vacations end, leisure travel is set to drop precipitously in the fall.
And while business travel is starting to return, it’s still a far cry from where it was before the pandemic.
Ferguson therefore predicts a tough second half for airline profitability amid falling demand that will drive ticket prices down again.
“The number of people willing to pay is going to drop significantly after Labor Day,” Ferguson said.