Flight prices reach the sky with the arrival of the summer travel season | North West

After a two-year layoff, Americans were quick to book summer flights this year — and pay exorbitant prices for their tickets.

Airlines invoke the imbalance between supply and demand. A shortage of pilots. Jet fuel prices are rising. These factors are real.

However, airline analysts now see something more deliberate at play.

With people starting to hold off on very high prices, and some moving away from their plans to fly, demand has plummeted. The airline’s response was not to cut fares, but to keep them high by reducing the supply of seats.

“They’re starting to see some resistance from travelers to push those fares,” said George Ferguson, senior aviation and aviation analyst at Bloomberg Intelligence. “At this point, you either cut prices and fill the planes, or you keep prices high and start cutting capacity. So we’ve seen them cut capacity.”

In short, airlines keep cutting their schedules in July and August not necessarily because they don’t have enough pilots but in part to keep ticket prices high and increase profits.

“They know how many pilots they have to meet that schedule. And they’re still getting in the way,” Ferguson added. “The shortage of pilots is a bit of a convenient excuse here. I think they can’t fill the planes with the fare levels they’re offering. So instead of cutting those prices and cutting their profitability, they’re cutting the schedule.”

A modern economy class ticket from Seattle to New York costs just over $1,000. A direct flight from Seattle to Cincinnati costs $1,300. Seattle-Los Angeles will cost $400-500.

For many, higher prices drive up the cost of vacation. For those who have to travel on short notice, perhaps for family reasons, it may not be a matter of choice.

In a country as large as the United States, with few practical alternatives to long-haul flights, the airline network is a vital part of the country’s transportation infrastructure – now priced out of the reach of many people.

Bob Mann, an airline industry analyst and consultant, said that without pent-up travel demand, “there would be no way to buy travel at these prices.”

“There is a view that because there is an increase in demand, airlines think they can charge for whatever they want,” he said.

Inflated ticket prices ‘mind-boggling’

The US air travel system is under clear strain, suffering from delays and cancellations that cause significant inconvenience and often significant additional expenses for travelers.

In April and May, Alaska Airlines didn’t have enough pilots to fly on its schedule, resulting in hundreds of flights being canceled. And while it was struggling to cope, the Seattle-based carrier cut its schedule by 10% this month.

Over Memorial Day weekend, Delta suffered an even bigger meltdown, canceling more than 700 flights, or 7% of its schedule. It made 100 daily flights through early August.

Hundreds of thousands of passengers have had their travel plans seriously disrupted this year. However, even as the quality and reliability of the US air travel system has fallen catastrophically with no relief in sight, ticket prices have gone up.

According to data compiled by Bob Harrell, who tracks ticket prices for travel industry analysts through his consulting firm Harrell Associates, average leisure fare last week was 41% higher than the same week last year.

Compared to pre-pandemic times, the price hike is even greater. Harrell data from a five-week period in March 2022 shows that median entertainment wages were 52% higher than they were in the same period in pre-COVID 2019.

“This is mind-boggling,” said Henry Hartfeldt, travel industry analyst at Atmosphere Research. “I am very concerned that we have reached a tipping point and consumers will simply say enough is enough. They will just cut back on flights.”

Airline revenues rise after a long drought

The pandemic explains part of the price pressure.

In the historical downturn in air travel over the past two years, airlines have had to significantly reduce their schedules and workforce. Now, with labor shortages — including pilots, flight attendants, baggage handlers and call center agents — airlines haven’t fully returned their employees or flights yet.

So there are fewer aircraft seats available now than in pre-pandemic times. Delta’s seat capacity in July is 85% of what it was in July 2019.

“You’re cramming a lot more people into a much smaller capacity,” Hartfeldt said.

The rise in jet fuel prices since the Russian invasion of Ukraine is another factor. The price of jet fuel is double what it was a year ago.

Alaska Airlines forecast in a statement this month that despite a fuel hedging strategy to trim the edge of higher costs, it will pay 60% more for jet fuel this quarter than it did in the same period in 2019.

And after two years of deep red ink and accumulated debt, chief executives at US carriers are seizing the opportunity to recoup some of their massive losses.

At an investor conference this month hosted by Sanford Bernstein, Delta CEO Ed Bastian said “Demand is off the charts.”

He said, “It comes with entertainment, it comes with the premium consumer. It comes with businesses, it comes with international.” “We expect prices to go up this summer probably between 25% and 30% on average. We’ve never seen anything of this magnitude.”

At the same conference, American Airlines CEO Robert Isom said the airline is maximizing its income by not selling all of its seats months in advance, but leaving many open to passengers who buy tickets closer to the flight at higher prices.

“We’re doing a great job of making sure there’s a lot of capacity that likely needs to be bought at higher prices,” Isom said. “We are able to reserve enough (seats) to ensure we are able to take advantage of close demand.”

tough summer to travel

Ironically, the service passengers who paid the most for were the worst ever.

Mann notes how over many years the service has deteriorated to the point where the airline industry is now almost self-serving.

“You do your reservations, you make your boarding passes. You do your fee purchases. You check in and you get your things on board,” he said. “Sometimes you get charged for doing all of these things, in addition to doing them yourself.”

In the best of times, the flight can go smoothly at least. But this summer, prepare for an even tougher ride.

Mann predicts that when aircrews reach federally permitted flying limits each month, possibly exacerbated by weather disruption or the COVID outbreak, airlines will not have enough reserve pilots to cover additional flights, as happened in Alaska.

“I can pretty much expect at the end of every calendar month, that the last four or five days are going to be very challenging operationally,” he said.

He added that although airlines have voluntarily cut their schedules, airline insiders with whom he spoke fear what lies ahead this summer.

“They don’t have confidence in being able to implement a reliable enough timetable that the system doesn’t melt away,” Mann said.

It’s going to be “a really tough summer for people to travel,” Hartfeldt agrees. When cancellations occur, it will be difficult to find open seats on other flights to rebook stranded passengers.

“All airlines are full or close to it,” he said. “If something goes wrong, there is simply less room to maneuver to restore the industry.”

“The travel industry is doing a lot to piss off travelers this summer. And it’s not just the airlines,” Hartfeldt added. “The hotels have reduced service. Car rental companies make reservations and then tell the people who show, ‘No, we don’t have a car for you.'”

After Labor Day

The reaction to the higher prices has already begun.

Hartfeldt said his contacts with airline reservations departments “are beginning to see a slight slowdown in booking speed.”

He said the $1,000 or $1,500 coast-to-coast ticket prices “are very popular with a lot of consumers, especially people who are traveling alone.”

Mann said airlines should be careful not to force a change in travel patterns that destroys existing demand.

“A lot of people will say ‘fuel prices are high, but if you ride in an SUV and even if you pay the toll and drive six or seven hours, it’s really not that bad,'” he said.

He said airlines will realize this sooner or later.

“They’ve been drinking their Kool-Aid for a while…so they keep charging these prices until people say no,” Mann said. Then they realize, ‘Whoa, wait a minute, we might have crossed our limits here. “

“Yes, there is an imbalance in supply and demand, but not to that extent,” he said. “We can’t raise people’s prices by 30, 40, 50% and not get a demand-destroying response.”

One glimmer of hope: It’s possible that airlines won’t be able to maintain high prices when the summer ends.

“When the economy sneezes, the travel industry catches a cold,” Hartfeldt said.

With consumers battered by inflation in nearly every spending sector and worried about a shaky economy, once booked vacations are already complete, leisure travel is likely to decline rapidly in the fall.

And while work travel is starting to return, it’s still far from where it was before the pandemic.

So Ferguson sees a difficult second half of the year for airline profitability amid lower demand that will drive ticket prices down again.

“The number of people willing to pay will drop significantly after Labor Day,” Ferguson said.

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