More Americans are taking to the skies this summer than there are empty seats on planes, pushing up ticket prices as airlines struggle with rising fuel costs, personnel problems as well as smaller fleets.
Flights with American Airlines, Delta Air Lines and United Airlines – the three largest domestic carriers – increased by almost 50% for the week ended May 23, compared to a year earlier, according to an analysis by Cowen, a financial services firm. Cowan tracked almost 300 routes across four different carrier fare categories using data from Harrell Associates, a New York-based company that tracks airline pricing trends.
A report from the Mastercard Institute of Economics shows that consumers are booking domestic and international travel at a rate not seen before the pandemic. By the end of April, flight bookings were up 25% from pre-pandemic levels, with the report noting an “unprecedented surge” in international travel based on anonymous spending data from Mastercard cardholders.
“Capacity is tense”
Another challenge for airlines: managing rising labor costs. Industry wages as a percentage of sales rose to 22%, according to Mastercard. Landing fees, maintenance and repair costs and other operating costs are also increased.
But rising airfare prices “are all driven by airline seat availability and demand,” said Robert Mann, owner of consulting firm RW Mann & Company. “There is some cost pressure, but it usually comes down to airline margins.”
It’s not uncommon for ticket prices to rise by about 30% during the summer months compared to the rest of the year, Mann said.
Airlines continue to recover from the effects of the pandemic, which saw travel virtually come to a halt, as well as addressing operational challenges, including COVID-19 testing requirements before departing passengers traveling to other countries.
“Some of the largest long haul international aircraft are not yet fully deployed and others are not yet available,” Mann said. “Therefore, capacities are overloaded, and demand is excessive, and therefore our prices are rising. It’s just the market’s reaction to the excess of demand over supply.”
