In recent times in the United States, airfares to many popular destinations have dropped to their lowest level in months; even holiday travel is much cheaper than last year. This has given consumers a break after months of frustration over high prices for all kinds of goods and services.
The abundance of good deals suggests that perhaps the strong recovery of the airline industry after the pandemic is finally slowing down, as ticket supply matches the relatively firm demand, and even exceeds it on some routes.
Let’s consider the fares recently obtained by Denise Diorio, a retired teacher from Tampa, Florida. She spent less than $40 on a round-trip ticket to Chicago and only paid $230 for a round-trip from New York to Paris, which she plans to take this month.
“I’ve been telling all my friends that if they want to go somewhere, they should buy their tickets now,” she commented.
The bargains she found may be exceptional, but Diorio is correct in saying that there are many offers.
This month, the average price of a domestic flight near Thanksgiving was nearly 9 percent below last year’s level. As for flights near Christmas, they were approximately 18 percent cheaper, according to the reservation and price tracking app Hopper. Kayak, the travel search engine, analyzed a wider range of dates around the holidays and found that domestic flight prices were around 18 percent lower by Thanksgiving and 23 percent lower by Christmas.
“In many cases, we are seeing some of the lowest fares since travel resumed after the 2020 cuts, actually,” said Kyle Potter, executive editor of the travel blog and deal alert service Thrifty Traveler.
The price of tickets for flights within the United States dropped during the summer, Potter asserted, and recently it is more common to find deals for international travel, particularly to Europe.
Airlines lower their fares when they want to tempt more people to book tickets because demand is low or competition is stronger. Undoubtedly, competition has intensified on some routes, but travel experts indicate that there is no certainty that demand is declining.
This year’s Thanksgiving is expected to set a record for air travel, with predictions of nearly 30 million passengers, according to Airlines for America, an industry group. This figure would be 9 percent higher than last year and 6 percent higher than in 2019, before the pandemic.
But some airlines claim that demand is declining during non-holiday or peak season periods. In addition, some airports have handled such a number of flights that transportation companies have been forced to reduce fares to fill planes.
That had not been a problem for most of the recovery period after the pandemic. Weather and other disruptions limited flight availability last year and in 2021, as did the shortage of trained pilots, spare parts, and planes, among other factors. These conditions caused an increase in ticket prices, kept planes full, and helped airlines achieve excellent profits.
“The aviation industry has never recorded the kind of profit margins and return on capital seen in the past 2.5 years,” said John Grant, chief analyst at aviation consulting and data firm OAG. “We are almost back to a more normal industry.”
For major U.S. airlines, the good times continue, driven in particular by a high demand for international flights. But smaller, low-cost companies have started to suffer. Several recently revealed disappointing financial results for the quarter ended in September. Executives of these airlines have said that demand is declining, fares have fallen, and costs have remained high. They also point out that bad weather and a shortage of air traffic controllers have complicated their operations.
For example, JetBlue Airways lost $153 million in the third quarter, compared to earnings of $57 million in the same period last year. The company recently indicated that it plans to shift some flights from crowded markets like New York to others where it expects better performance, such as the Caribbean. Low-cost transportation companies Spirit Airlines and Frontier Airlines recently informed investors that they were seeking to cut tens of millions of dollars in costs.
Competition has been fierce in some major markets, which has pushed down fares and profits.
In Denver, where Frontier’s headquarters are located, there were 14 percent more available seats this summer than in the summer of 2019, according to aviation data provider Cirium. Miami and Orlando, Florida, two popular destinations for many airlines, experienced even greater increases in capacity.
However, while airlines added flights in popular markets to attract passengers, airports in other cities, such as Los Angeles, a hub for many major airlines, saw considerable reductions in capacity compared to the summer of 2019.
“It is evident that there is a huge correlation between airlines that are doing well and those that are struggling, in terms of their margins, when we compare where their concentrations are,” said Barry Biffle, Frontier’s CEO, during a conference call to present the airline’s third-quarter results.
As for international routes, analysts are not so certain why fares are falling or if they will remain that way. Bargains like the one Diorio found for her trip to Paris could be a sign that larger airlines will soon face financial pressures or simply that the industry is returning to a pre-pandemic normalcy.
“Typically, demand for travel to Europe decreases during the winter,” explained Steve Hafner, CEO of Kayak. “So, it seems to me that this reflects normal trends.”
However, the demand for international travel could face obstacles, partly due to the conflicts in the Middle East and Ukraine. Analysts also warn that many consumers may be less willing to splurge on travel or have fewer opportunities to do so now than in the past two years when they had money saved during the pandemic. Even if demand remains firm, airlines risk offering too many seats on popular foreign routes.
Whatever the cause of the recent drop in fares, the deals are a welcome relief for travelers after years of high prices, said Potter.
“In any case, the recipe for cheap flights is there,” he said. “If it’s just a slight excess of capacity, it’s a win for consumers. If travel demand is declining, it’s an even bigger win for people who will never give up traveling.”
Niraj Chokshi writes about aviation, railways, and other transportation industries. More by Niraj Chokshi.