Plane prices soar as Americans shrug off Covid and inflation to flee

US airlines are preparing to raise ticket prices even more as Americans ignore the fastest rise in domestic ticket prices in decades in their determination to travel.

Airline ticket prices rose 18.6 percent in April from the previous month, the largest one-month increase in CPI history, according to the US Bureau of Labor Statistics. It was one of the biggest contributors to the 8.3 percent rise in CPI last month.

On an annual basis, the airline price index rose 33.3 percent, the largest one-year increase since 1980, even though fares were still low at the same point in 2021 due to the COVID-19 pandemic.

“We hope that customers will tolerate that [increasing prices] “For a long time,” said Jeffrey Goh, chief executive of Star Alliance, the global airline association that includes United Airlines and Lufthansa. But “the industry is not deaf and blind to the cost of living and rising inflation [are] A risk in terms of the industry recovery.”

Demand is outstripping the supply of seats, allowing carriers to pass on fuel and higher labor costs to customers. Travel spending is increasing across the board with the fastest acceleration in airfares, so the booking momentum should continue, said Michelle Meyer, chief US economist at the Mastercard Institute of Economics.

She added that strong wage growth and bloated savings meant consumers “may be able to tolerate price increases for longer, particularly in the kind of spending they prioritize.” There is also no indication that the current spike in Covid-19 rates has slowed spending on airline tickets as it has in previous waves.

Amid strong pent-up travel demand, US airlines remained optimistic about summer travel and their overall recovery, despite inflationary pressures on consumers.

“Demand is as strong as we’ve ever seen,” American Airlines CEO Robert Isom said during an earnings call in April. American, United and Delta Air Lines, the three largest US carriers, expect earnings for the second quarter of the year, with United forecasting record quarterly revenue.

At an industry conference in March, chief commercial officer Andrew Nosella said United had not been selling seats for summer travel at an upfront discount. “We’ve saved the seats and are now selling them at much higher returns, so we’re very happy with that.”

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The average price across all US airlines for a domestic ticket booked one week before travel was $208 on May 9, up from $188 on May 2, but down from $214 on April 11, according to Raymond James US Bank.

Meanwhile, US airlines fly 7 percent fewer seats in the second quarter than in the same period in 2019, according to Raymond James Savanthi Seth analyst.

“There is always [price] “We don’t see demand destruction in the short term,” said Helen Baker, an analyst at Cowen.

Baker predicted that prices would rise 7 percent per month through at least June and that Americans would be able to tolerate the increases beyond the summer. We are worried for the month of September [and] October reservations.

Seating capacity is restricted by high fuel prices and staffing issues, including pilot training bottlenecks, said Seth, who believes the increases will continue for a few more months.

“Fuel, which accounts for 25 to 40 percent of aviation costs, is close to 80 percent,” she said. The Big Three U.S. airlines, which don’t hedge with fuel, have reported successful pass-through of the cost to passengers.

Labor costs for airlines have also risen because they raise wages to attract and retain workers. Flight plans have been further affected by aircraft shortages: the United States has scaled back its schedule after continued delays in the delivery of Boeing 787 Dreamliners, while the United Boeing 777 fleet, which accounts for 10 percent of its capacity, remains idle after an engine accident last year.

Demand has continued to grow as people head to the summer leisure trips they have been eager to take during the pandemic, with carriers reporting a greater willingness of customers to pay for premium seats.

The recovery of business travel is also accelerating, leaving less price-sensitive travelers in the mix. Roughly 85 percent of US domestic business revenue had returned by the end of March.

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