U.S. Airlines Facing Lower Domestic Fares as International Travel Takes Off

U.S. airlines that enjoyed higher domestic airfare during the post-pandemic recovery are now seeing a shift in consumer preferences as travelers opt for international trips over domestic destinations. Carriers such as Southwest Airlines, Alaska Airlines, and American Airlines have forecasted slower revenue growth or weaknesses for the third quarter, despite robust demand.

The shift in travel patterns is reflected in airfare trends, with domestic U.S. airfare averaging $258 for a round-trip ticket, down 11% from the previous year and 9% from 2019. In contrast, international tickets are up 8% from 2022 and are 23% more expensive than 2019, averaging $958.

Southwest Airlines, for example, expects unit revenue to drop by as much as 7% in the current quarter due to faster-than-usual capacity growth. Alaska Airlines also forecasts a decline in unit revenues and a capacity increase of up to 13%.

While domestic-focused airlines face challenges in the post-peak summer travel season, carriers like Delta Air Lines and United Airlines are benefiting from strong international revenue, particularly on routes to Europe and Asia.

The shift in traveler preferences highlights the evolving nature of the airline industry’s recovery from the pandemic, with airlines needing to adapt to changing travel patterns and the ongoing impact of corporate travel demand.