Airfares are down 13% over the past year, but they may be headed back up soon
Airfares are down 13% over the past year, but they may be headed back up soon
We got some good news Tuesday on inflation: Price increases slowed in October. The Consumer Price Index was up 3.2% year over year, compared to 3.7% in September. And core inflation, which excludes the volatile prices of energy and food, also slowed.
Lots of prices are still increasing, for sure — just more slowly than before. But some are actually coming down. Airline fares, for instance, which are about 13% lower than they were a year ago.
Around this time last year, I did another story about inflation and airfare. Then, it was way up: 43% higher than in the fall of 2021. Demand was really high, airlines were having trouble hiring enough staff and flying enough flights, and fuel prices were high.
Now, a year later, fuel prices are down, in addition to other factors.
“Airlines have added back to above 2019 seat capacity levels,” said Hayley Berg, lead economist at the travel app Hopper.
She said demand has also been leveling out. “Last summer, there was an incredible amount of pent-up demand. Travelers were taking extra trips, willing to spend a lot more. This summer was a much more normal summer.”
That’s forcing airlines to compete more for customers again.
“Most passengers are making up their minds about which airline to fly trip to trip, so airlines know that they have to use price to capture customers,” said Henry Harteveldt, a travel industry analyst with Atmosphere Research Group.
“This year we are seeing some airlines being very aggressive with their cheapest fares, Basic Economy … Basic Economy is a stripped down fare, basically think of it as getting you the seat and the seat belt and almost nothing else,” Harteveldt said.
By offering those fares, he said, bigger airlines can compete effectively with budget airlines. (And then make some of that money back by charging those passengers for bringing a bag, picking their seat or basically anything else.)
For passengers looking for a deal, “times are good right now, but they’re not going to last, at that low end of the market,” said Mike Arnot at the airline analytics company Cirium.
Partly because jet fuel prices are going up again, and so are labor costs.
Unions for pilots and flight attendants have been negotiating new contracts, some with big pay increases. “So those cost pressures are going to hit the airlines,” Arnot said.
And, Arnot said, that will eventually be passed down to customers.
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