May 27, 2024

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Airfares in the United States are experiencing a significant decline, much to the relief of passengers

Airfares in the United States are experiencing a significant decline, much to the relief of passengers

Recently, flight prices to many popular destinations in the United States have fallen to their lowest levels in months; Even traveling during the holiday season is much cheaper than last year. This has given consumers a respite after months of frustration due to rising prices for all kinds of goods and services.

The abundance of good offers suggests that the airline industry’s strong post-pandemic recovery may finally be slowing, as ticket supply matches demand, which appears relatively flat, and even exceeds it on some routes.

Consider the rates recently obtained by Denise Diorio, a retired teacher from Tampa, Florida. He spent less than $40 on a round-trip ticket to Chicago and paid just $230 for a round-trip from New York to Paris, which he plans to take this month.

“I told all my friends that if they wanted to go somewhere, they should buy tickets now,” he said.

The deals he finds may be exceptional, but Diorio is right when he says there are a lot of deals.

Just this month, the average price of a domestic flight during Thanksgiving was nearly 9 percent below last year’s level. As for flights around Christmas, they were about 18% cheaper, according to the booking and price tracking app Hopper. Travel search engine Kayak looked at a wide range of dates around the holidays and found that domestic flight prices were about 18 percent lower on Thanksgiving and 23 percent lower on Christmas.

“In many cases, we’re actually seeing some of the lowest prices since travel resumed after the 2020 cuts,” said Kyle Potter, executive editor of travel blog and deal alert service Thrifty Traveler.

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Potter said ticket prices for flights within the United States dropped over the summer, and recently it has become more common to find deals on international travel, especially to Europe.

Airlines lower their prices when they want to attract more people to book tickets because demand is low or competition is stronger. Competition has certainly intensified on some routes, but travel experts say it is not certain that demand will decline.

This year’s Thanksgiving is expected to set a record for air travel, with about 30 million passengers expected, according to Airlines for America, an industry group. This number will be 9 percent higher than last year and 6 percent higher than in 2019, before the pandemic.

But some airlines say demand declines during periods other than holidays or peak seasons. In addition, some airports handled a large number of flights forcing carriers to reduce prices to fill aircraft.

This was not an issue for most of the post-pandemic recovery. Weather and other disruptions limited flight supplies last year and in 2021, as did shortages of trained pilots, spare parts and aircraft, among other factors. These conditions caused ticket prices to rise, kept planes full, and helped airlines achieve excellent profits.

“The aviation industry has never seen the kind of profit margins and return on equity that we have seen over the last two-and-a-half years,” said John Grant, principal analyst at aviation data and consulting firm OAG. “We’re almost back to a more normal industry.”

The good times continue for major U.S. airlines, driven in particular by strong demand for international flights. But smaller, less expensive companies are starting to suffer. Many revealed disappointing financial results for the quarter ending in September. Executives at those airlines said demand was declining, prices were falling and costs remained high. They also point out that bad weather and a shortage of air traffic controllers have complicated air operations.

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For example, JetBlue Airways lost $153 million in the third quarter, compared to a profit of $57 million in the same period last year. The company recently indicated that it plans to shift some flights from busy markets, such as New York, to other markets where it expects better performance, such as the Caribbean. Budget airlines Spirit Airlines and Frontier Airlines recently told investors they are looking to cut costs by tens of millions of dollars.

Competition was fierce in some key markets, driving down prices and profits.

In Denver, where Frontier is headquartered, there were 14 percent more seats available this summer than in the summer of 2019, according to aviation data provider Cirium. Miami and Orlando, Florida, two popular destinations to which many companies fly, saw larger increases in capacity.

However, while airlines have added flights in popular markets in an effort to attract passengers, airports in other cities, such as Los Angeles, a hub for many major airlines, have seen significant declines in capacity compared to the summer of 2019.

“There’s clearly a big correlation between airlines that are doing well and those that are struggling, in terms of their margins, when we compare where their concentrations are,” Frontier CEO Barry Biffle said last month during a conference call to present the airline’s 2019 results. . Third quarter.

As for international routes, analysts are not sure why prices are so low or whether they will remain that way. Deals like the one Diorio scored during his trip to Paris could be a sign that major airlines will soon face financial pressure or simply that the industry is returning to its pre-pandemic normal.

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“Demand for travel to Europe typically declines during the winter,” said Steve Hafner, CEO of Kayak. “So it seems to me that this reflects natural trends.”

But demand for international travel may face headwinds, partly due to wars in the Middle East and Ukraine. Analysts also warn that many consumers may be less willing or able to spend money on travel now than they were in the past two years, when they had money they saved during the pandemic. Even if demand remains strong, airlines risk offering too many seats on popular overseas routes.

Potter said that whatever the reason for the recent drop in prices, the deals represent a welcome relief for travelers after years of high prices.

“Anyway, the recipe for cheap flights exists,” he added. “If it’s just a little bit of excess capacity, that’s a win for consumers. “If travel demand goes down, in some ways that will be a bigger win for people who would never give up travel.”

Neeraj Chokshi writes about aviation, railways and other transportation industries. More from Neeraj Chokshi