Airline Ticket Prices Have Only Recently Caught Up With Inflation

Over the past year or two, there’s been a steady stream of coverage about the cost of airline tickets. For the most part, headlines have focused on the fact that prices seem to be skyrocketing.

As recently as February, CNN reported that some airfares were up by as much as 50 percent over one year earlier. That news story was based on a data analysis conducted by the travel site Hopper, which showed that compared to 2019, international fares to Asia in particular were about 50 percent more costly than the previous February. Similarly, the report showed that fares to Europe were about 15 percent higher than one year ago.

In the U.S. meanwhile, airline ticket prices as of February 2023 were about 20 percent higher than one year earlier, but only 4 percent higher than pre-pandemic costs in 2019 (which is an important point, so read on.)

A new report from the International Air Transport Association (IATA) suggests airline ticket prices, as shocking as they may be, are not nearly as high as we all think they are.

“There has been much media coverage of the perceived acceleration in air ticket prices compared to the general rise in consumer price inflation (CPI),” begins the IATA report, which goes on to explain that “it is clear that airline ticket prices have only just caught up with the average inflation rate” in countries that are part of the Organization for Economic Development and Cooperation (OECD).

The report also points out that prices “remain significantly below the inflation seen in jet fuel prices.” This is an important point because the cost of jet fuel accounts for 25 percent to 30 percent of an airline’s operating costs, according to IATA, which is a challenging reality when prices for fuel are steadily notching upward.

IATA’s report also offers some context designed to help the public understand why airline ticket prices have appeared to be especially costly, when perhaps they’re not actually that high after all. (At least when compared to pre-pandemic prices.)

As air travel ground to a halt in the earliest days of the pandemic, ticket prices fell steeply, and remained low for much of 2020 and the first quarter of 2021, the IATA report explains. During the 12-month period ending March 2021, according to IATA, global air fares fell 53 percent over the same period the previous year. They also declined 36 percent in OECD countries.

But fast forward to May 2022, and the average ticket prices have recovered to what they were pre-pandemic. It’s a reality Hopper acknowledged as well. At just 4 percent higher than pre-pandemic pricing in 2019, for instance, last year’s domestic airfare prices should have been that shocking, suggested Hopper.

Meanwhile, prices for goods (the Consumer Price Index) shot up 15 percent in May 2022 compared to May 2019. And the cost of jet fuel in particular was up 92 percent—meaning nearly double in price from 2019 for airlines.

And the resulting “recovery of airfares” as IATA calls it, was, in part, in response to this sharp increase in jet fuel prices. Driven by Russia’s invasion of Ukraine, jet fuel prices reached a record-high of $172 per barrel in June 2022.

At the same time, airlines found themselves grappling with rising costs exacerbated by capacity constraints, including supply chain disruptions, aircraft delivery delays, flight crew shortages, and high labor costs, says IATA. And all of this began pushing up ticket prices even higher.

Add to those factors the pent-up demand from travelers, as entry restrictions around the world rapidly disappear, and finally you begin to see airline ticket prices have “only recently” begun to outpace overall inflation globally, suggests IATA.

The key takeaway from the IATA report is that while we have all felt like prices were soaring, they were really just returning to pre-pandemic norms—at least initially anyway. We had all gotten used to those rock bottom prices that dominated the past few years when the airline market essentially tanked. Consumers may have forgotten what prices were like back in 2019.

And only recently, have prices begun exceeding the rate of inflation.

“The increase in airline ticket prices has been outpacing overall inflation globally only recently and matched…CPI compared to pre-pandemic levels at the end of February,” says IATA.

Meaning, February 2023 is when prices truly began to accelerate and enter sticker-shock territory.

If there’s any good news here, it is that looking forward in 2023, airlines are expected to face “relatively lower fuel prices” compared to last year. And this reality may alleviate some of the pressures on operating costs.