The pandemic compensated intrepid travelers with cheap fares. That’s over.
Delta Air Lines
and other carriers are bringing cheer—to investors, at least—with earnings reports citing surging demand. So the higher fares they’re charging for summer flights look like they will stick.
Fuel surcharges and a cautious expansion of seating capacity have caused airfares for the coming summer to soar as travel demand returns to pre-Covid levels. A July round trip from Atlanta to Maui will cost at least $1,500.
Asked on Wednesday morning’s earnings call if Delta (ticker: DAL) was seeing any pushback against higher fares, president Glen Hauenstein said: “Absolutely not.”
The travel price-comparison site Kayak says that the cost of domestic flights has jumped 38% since the year began, while international fares have risen 28%. Kayak suggests that travelers book early and avoid flying Sundays and holiday weekends.
“We’ve been trying to catch up with this robust demand,” Hauenstein said. “We haven’t seen a lot of resistance to the price points that we have in market.” Travelers looking for lower fares will need to be flexible about the days they will travel. Like Kayak, he advised consumers to reserve early.
Travel has been cheap and no one can begrudge the airlines’ charging what the market now bears. It has been an awful two years for the airline industry, said John Grant, chief analyst at the airline data firm OAG Aviation Worldwide. And the jump in oil prices has raised jet-fuel costs in North America by 158% over last year, he says.
Fuel surcharges are adding $340 to $400 per flight on trans-Atlantic routes between the U.S. and the U.K., said the analyst. Airlines on either side of the ocean have been able to pass the cost along in their fares. But carriers in Asia have been less willing to raise prices because travel in that region is still trying to get out from under Covid-19.
Although carriers have brought more jets out of mothballs as Covid cases ease in North America, the industry is being cautious in adding capacity, Grant said. Each jet adds hundreds of seats to a route, making it hard for an airline to balance yield—that is, flying with filled seats—with revenue maximization.
One development that could unleash more demand to visit the U.S., noted Grant, would be if federal regulators decide to drop the requirement for travelers from abroad to test negative for Covid within 24 hours of their departure. That decision will come by April 18.
The OAG analyst thinks North American demand, and airfare prices, will remain strong through September. “I suspect we are going to have a very strong summer for the airline industry,” he said.
Write to Bill Alpert at [email protected]