- In presentations at an investor conference, airline officials said they expect to offset their higher fuel bills with higher ticket prices thanks to surging demand.
- Another COVID-19 wave and other factors could hurt bookings again, but for now the trend in ticket prices is up.
- Don’t wait for prices to go down, especially to popular spring and summer vacation destinations.
Thanksgiving-like crowds are returning to security checkpoints and airport parking lots are filling up in popular destinations.
But few things say air travel is roaring back more than airline executives taking a spike in oil prices in stride. Fuel is airlines’ second-biggest expense after labor.
In presentations at an investor conference in New York Tuesday, officials from Delta, American, United, Southwest and JetBlue said they expect to offset their higher fuel bills thanks to sizzling travel demand from vacationers and an uptick in business travel.
That’s bad news for travelers who haven’t bought tickets for spring break or summer vacation yet, as strong bookings enable airlines to raise ticket prices.
Delta Air Lines President Glen Hauenstein said the airline needs to collect an extra $30 or $40 per average $400 round trip ticket to cover its rising fuel costs and so far is having no trouble doing so given a surge in bookings.
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“We are very, very confident of our ability to recapture over 100% of the fuel price run-up in the second quarter and through probably the end of the summer,” he said at the JP Morgan Industrials Conference.
Hauenstein said he has never seen travel demand rebound as quickly as it has following the sharp decline in bookings from the omicron variant in late 2021 and early this year. One day last week, the airline had the highest sales day in its 100-year history, he said.
Delta is not alone in its confidence in the industry’s recovery and ability to pass along fare increases.
► American Airlines CEO Doug Parker said “demand is higher than it’s ever been” for domestic travel and that overall bookings are “incredibly strong.” Last week, the airline had three record ticket sales days, he said.
► United Airlines Chief Commercial Officer Andrew Nocella called the spike in demand unprecedented.
“The pandemic really seems to be behind us here in the US,” Nocella said. “Bookings across most of the network are at normal levels.”
Nocella said United expects to be able to offset a “large chunk” of its higher fuel bill by boosting fares and will cover the rest by trimming some flights.
United purposely held back seats for sale for summer travel in anticipation of a rebound so it could charge more for tickets when bookings resumed post-omicron. And it’s working, he said.
“We’re pretty happy about that,” he said.
► Southwest Airlines’ spring break bookings are strong and above 2019 levels, according to chief financial officer Tammy Romo.
The airline increased fares across its network in early February and demand has remained strong, she said.
“We are really encouraged by what we are seeing so far,” she said.
► JetBlue CEO Robin Hayes as the airline has been seeing “incredible revenue momentum.”
He said a key revenue metric for Easter travel in mid-April is ahead of 2019 levels despite an increased number of flights.
It all adds up to more sticker shock for consumers fighting inflation on every front this year. Another COVID-19 wave and other factors could hurt bookings again and reduce airlines’ ability to raise fares, but for now, the trend in ticket prices is up. With domestic travel bookings and revenue surpassing pre-pandemic levels for the first time in the second week of February and ticket prices were up 5%, according to the Adobe Digital Economy Index.
“This is a major turning point, and it shows a level of consumer confidence we’ve not seen in many months,” Vivek Pandya, lead analyst at Adobe Digital Insights said in a statement.
‘How much can the consumer bear?’
The big question for airlines and travelers is how high ticket prices can go before travelers resist.
“How much can the consumer bear?” JP Morgan airline analyst Jamie Baker asked airline executives.
Delta’s Hauenstein said the airline is pricing summer flights to a level that will cover higher fuel costs and so far, bookings are above 2019 levels.
“We haven’t actually found the breakpoint yet,” he said.
JetBlue’s Hayes said the airline also has not seen any so-called “demand destruction.”
“We’re still dealing with pent-up demand from people,” he said.
Airfares are on the rise: 5 tips for travelers shopping for airline tickets
► Don’t wait for prices to go down, especially to popular spring and summer vacation destinations. If you see a palatable ticket price on the dates and times you need, book it and don’t look back. (Or look back occasionally and rebook if the flight price has dropped since major airlines have dropped change fees on most tickets and Southwest has never charged change fees. You’ll receive a credit for any fare difference.)
► Don’t overlook airline and travel website flexible date calendars and airfare alerts from apps including Hopper and Kayak if your travel plans are flexible.
► Do include online travel agencies like Expedia and search engines like Google Flights and Kayak in your research as they combine flights from different airlines for the itinerary, which can save money over flying one airline for the trip. Just make sure you aren’t flying into one airport and out of another in metro areas with more than one option if that’s a dealbreaker.
► Don’t limit your search to the major airlines. Discount airlines Spirit and Frontier, which recently announced plans to merge, and Allegiant have been expanding rapidly. As have newcomers Avelo and Breeze. Above all, add up the fees for extras, including a carry-on bag or seat assignment to make an apples-to-apples comparison with major airlines.
► Do skip that summer trip in favor of a fall or other off-season getaway if your travel plans are flexible and you’re on a budget.