As travel rebounds, airlines are pushing fares higher

Photo: AP

U.S. airline executives are the most optimistic they’ve been since the coronavirus pandemic began thanks to an unfolding travel rebound fueled by vaccination ratesCOVID-19 case trends and the easing of travel restrictions.

“I’m relieved. I’m optimistic. I’m enthused. I’m grateful,” Southwest Airlines CEO Gary Kelly gushed on the airline’s earnings conference call Thursday, April 22nd.

“We’re starting to see light at the end of this very dark tunnel,” American Airlines CEO Doug Parker told investors.

“My, what a difference a year makes,” United CEO Scott Kirby said on Tuesday.

The spike in travel demand, which began in March and shows few signs of slowing down as the summer travel season looms, is welcome news for the battered industry. Southwest alone lost $1 billion in the first three months of the year.

But it comes with a price for travelers: higher ticket prices. Passengers who haven’t flown since the pandemic and expect to find the bargain fares they read about over the past year are likely to be disappointed, especially on popular routes and during peak travel periods like holiday weekends.

Airlines that were dangling cheap faresto help fill planes during the pandemic suddenly find themselves able to boost fares as short- and longer-term bookings increase at a good clip. Delta’s bookings in March were twice the level of January. Southwest’s early reservations for summer travel are so strong the airline will operate nearly as many June flights as it did in 2019. And American said its daily net bookings this week reached 2019 levels without the benefit of much international or business travel.

In earnings calls with investors over the past week as they reported quarterly results, airline executives weren’t shy about discussing the newfound leverage they have to raise ticket prices thanks to pent-up demand for trips within the United States and to close international vacation spots like Mexico and the Caribbean.

Alaska Airlines’ average fares for peak summer flights booked to date are higher than 2019, according to Andrew Harrison, the airline’s chief commercial officer.

“I think you’re going to see a sure but stable climb,” he said. 

Vasu Raja, chief revenue officer for American Airlines, said booked ticket prices at the beginning of the year were about half of 2019 levels. As the airline looks out to early summer bookings, he said, the figure is up to 90%. 

American, he said, is doing “all we can” to boost average fares per passenger, or yields as they are known in industry lingo.

It’s a matter of supply and demand, Raja and others said.

“We’re seeing a lot of cases, especially on peak holidays and things like that, where frankly, demand for seats is greater than the supply of seats,” Raja said.

United Airlines is also managing fares more than it did during the pandemic and likes the trends it’s seeing, according to Andrew Nocella, United’s chief commercial officer.  Average fares paid for mid-June domestic leisure trips so far are up from June 2019.

“We still have a long way to go, and this summer is still quite a way off,” Nocella said. “I’m really actually quite bullish that we’ve turned the corner on that.”

Are pandemic cheap flights a thing of the past?

The bottom line for travelers: Start shopping for tickets now or risk higher prices or a less-than-desirable flight itinerary.

There will still be pockets of deals, of course, especially on routes with intense competition and especially from budget carriers. Allegiant and Frontier were touting $29 fares via email promotions on Thursday.

Deals could become widespread if there is another surge in coronavirus cases or if the Centers for Disease Control and Prevention and other government entities announce travel restrictions, which could hurt travel demand. Bookings to Mexico took a hit in January after the CDC said it would require travelers on international flights to the United States to show proof of a negative COVID-19 test or recovery from the virus to board.

The U.S. State Department this month raised its alert level on dozens of foreign countries, including Mexico, to “do not travel” status, but Southwest and American executives said Thursday that they have not yet seen any impact on bookings.

Another unknown as summer approaches: whether airlines get giddy and add too many flights. That would shift the equation back in travelers’ favor. Already, two new airlines, Avelo and Breeze, are set to debut.

“We’re very well aware that it will still be messy and that we’ll have to carefully manage,” Kelly said.

How to save money on plane tickets this summer

Don’t dawdle, especially if your travel dates and destination are set. Last-minute deals were prevalent early in the pandemic because so few people, especially the business travelers who buy pricey last-minute tickets, were traveling. But airlines say traditional booking patterns are returning, so they know where demand is strong and are back to holding back some seats in hopes of a last-minute premium. As with holiday season travel, if you see a fare that’s palatable, grab it and don’t look back.

Be flexible with your destination and dates if your only goal is to go somewhere this summer. United just added a new feature where you put in your home airport and dates and a map pops up with flight prices. Google Flights also has a popular map feature. 

Travel on Tuesdays and Wednesdays. Budget carrier Spirit said it is more likely to offer deals on those dates to fill planes this summer than weekends when demand is already strong.

Postpone your trip until late summer or early fall. It’s a slower period for vacation travel, and if business travel doesn’t bounce back significantly, airlines will have to lower fares to lure vacationers in the lull before the busy Thanksgiving and Christmas travel season.

Source: USA Today

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