Airfare prices soar as Americans shake off Covid and inflation to get out of trouble

American Airlines is poised to raise airfares further as Americans shrug off the fastest domestic airfares in decades and are determined to travel.

Air ticket prices rose 18.6% in April, the largest monthly increase in history consumer price index, according to the U.S. Bureau of Labor Statistics. They were among the biggest contributors to the 8.3% rise in the CPI last month.

On an annual basis, the Airline Fares Index rose 33.3%, the biggest one-year increase since 1980, although prices remain depressed at the same time in 2021 due to the Covid-19 pandemic.

“We want our customers to tolerate [increasing prices] A very long time.But “the industry is not deaf and blind to the rising cost of living and inflation [are] Risks to industry recovery”.

Demand has outstripped the supply of seats, allowing airlines to pass on high fuel and labor costs to customers. Michelle Meyer, chief U.S. economist at the Mastercard Institute for Economic Research, said that with airfare prices accelerating and travel spending rising across the board, booking momentum should continue.

She added that strong wage growth and inflated savings meant consumers “may be able to tolerate higher prices for longer, especially for one of their priorities”. There is also no sign that the current Covid-19 price spike has slowed airfare spending as it has with previous waves.

Amid strong, pent-up travel demand, American Airlines remains bullish on summer travel and its overall recovery, although Consumer inflationary pressures.

“Demand is the strongest we’ve ever seen,” American Airlines Chief Executive Robert Isom said on an earnings call in April. Three major U.S. airlines, American Airlines, United Airlines and Delta Air Lines, are expected to be second The quarter will be profitable, and United expects record quarterly revenue.

Andrew Nocella, United’s chief commercial officer, said at an industry conference in March that United did not sell summer travel seats at a discount early on. “We kept the seats and now we’re selling them at a higher yield, so we’re very happy about that.”

According to Bank of America Raymond James, the average price of a domestic ticket booked on all U.S. airlines in the week before travel was $208 on May 9, up from $188 on May 2, but down from $188 on April 11. $214.

Meanwhile, Savanthi Syth, an analyst at Raymond James, said American Airlines had 7% fewer seats on its flights in the second quarter than in the same period in 2019.

“There is always a [price] But “we don’t see demand destruction in the near term,” said Helane Becker, an analyst at Cowen.

Becker predicts that home prices will rise 7% a month through at least June, and that Americans will be able to put up with rising prices until after the summer. “We are worried about September [and] reservations for October”.

Seat capacity is limited due to higher fuel prices and Staffing issuesincluding pilot training bottlenecks, said Syth, who believes the growth will continue for several months.

“Fuel is 25 to 40 percent of an airline’s cost, but it’s nearly 80 percent higher,” she said. The three major U.S. airlines that don’t hedge fuel report successfully passing the cost on to passengers.

As airlines raise wages to attract and retain workers, their labor costs have also risen.Plane shortage further affects flight plans: American Airlines cuts its schedule after continued delays on Boeing 787 Dreamliner deliverywhile United’s Boeing 777 fleet, which accounts for 10% of its capacity, remains ground After an engine accident last year.

Demand continues to grow as people crave summer leisure travel during the pandemic, with airlines reporting that customers are more willing to pay for premium seats.

The recovery in business travel is also accelerating, with less price-sensitive travelers joining in. About 85 percent of American’s domestic revenue had been returned as of the end of March.

Source link