Airfare Prices on a Downward Trend?
With the 4th of July holiday now in our collective rearview, the busy summer travel season’s peak period would seem to have passed, at least conjecturally speaking. One wonders whether the summer’s sky-high price of plane seats will recede with it.
According to the U.S. Bureau of Labor Statistics (BLS) latest Consumer Price Index (CPI) report, airfare prices were one of the few areas to decline during a period when inflation soared more steeply than it has in four decades, rising 9.1 percent over a year ago and surpassing even experts’ expectations.
The price of flights fell by a meager 1.8 percent in June, while still outstripping last year’s prices by 34.1 percent. Okay, we’re not saying airfares fell by much, but a price drop is always a welcome trend. The price of plane tickets often drops following the summer travel season’s peak, as many families have already taken their vacations and kids head back to school.
Despite exorbitant airfare costs and fewer available flights, as airlines and airports struggle to balance consumer demand with limited staffing and operations, Americans have continued to pay high prices to go on their vacations.
The surge in post-pandemic travel that’s continued through spring and summer has driven air carriers’ revenues above 2019 levels, but escalating fare costs have begun to force many travelers to alter or abandon their plans.
But, at some point, the sheer expense is bound to make air travel a cost-prohibitive prospect for many. The question now, noted CNBC, is how tenable travel demand will remain as these record-high inflation rates persist and an economic slowdown looms.
Nevertheless, airline execs remain optimistic about sales for the near future, betting that Americans’ pent-up hunger for travel outside their own backyard will carry through.
“People have not had access to our product for the better part of two years,” Delta Air Lines CEO Ed Bastian said during last week’s quarterly earnings call. “We’re not going to satisfy…that thirst, in a space of a busy summer period.”
Still, Bastian qualified his outlook by saying, “We also acknowledge that our crystal ball is only about three to four months right now and it doesn’t go all the way as far as people would like us to think…But everything we see tells us that we’ve got to run.”
Others’ opinions differ. “Come the fall, the impact of cost inflation on consumers’ and corporate travelers’ discretionary income and budgets could lead to softening aggregate demand for air travel,” Jonathan Root, a transportation analyst at Moody’s Investors Service, wrote last month.
Even if that turns out to be the case, airlines’ already trimmed-down flight schedules should compensate for any decline in demand, goes the rationale. “The current capacity constraints would protect the airlines from having too much capacity, should this occur,” Root agreed in his analysis.
“Right now, people just have money to burn,” remarked Adam Thompson, founder of the consulting firm Lagniappe Aviation. “Once people no longer have money to burn, you have to convince them they want to buy your product.”