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Recent data from Hopper and the Bureau of Labor and Statistics reflects news that’s surely music to travelers’ ears: The drop in oil prices has caused a sharp decrease in airfare.
The airfare modeling and forecasting site Hopper recently reported that the average airfare for January 2016 was 2.53% lower than December, and a staggering 14.2% lower than January 2015. As the icing on the cake, Hopper forecasts that low prices are here to stay for the foreseeable future, since recent global news indicates that there is no near-term rise predicted for crude oil prices.
Meanwhile, the Bureau of Labor and Statistics recently released data that export international airfares — defined as fares paid to US carriers by foreign residents — dropped an astounding 15% in 2015. This is unheard of; the Bureau reported that this is the biggest percentage drop in a calendar year for export fares since 1987, when such statistics started being kept. Import airfares, defined as fares paid to foreign carriers paid by US residents, dropped by 9.9% as well.
The Low-Cost Carrier Effect on Airfares
The “Spirit effect,” a reference to what was once the “Southwest effect,” is very real. Hopper’s analysis of 5,000 domestic nonstop routes shows that the entrance of a low-cost carrier — defined as Spirit, JetBlue and Frontier — caused average airfares to drop by half on aggregate, which in effect caused a 20% decrease in legacy carrier pricing on those routes. That’s not to mention the Mint effect — the lower premium transcon prices we’re seeing as a result of JetBlue’s competitively priced service.
Spirit and Frontier can really be classified as ultra-low cost-carriers, as they specifically cause the biggest disruption, at times lowering particular routes by 70%! Finally, market demand increased a stunning 60% upon the entrance of low-cost carriers; essentially, lower fares tempt people to travel more. Shell-shocked legacy airlines, in a concession of sorts, are starting to offer basic fares in an attempt to compete in a cloudy environment. The good news is that the overall winners here are consumers.
Maximize Your Airfare Purchases
Even when airfares are low, you should maximize your spending by using a card that gives you bonus points or miles on this category of purchase. For example, the Chase Sapphire Preferred Card earns you 2 Ultimate Rewards points per dollar on all travel purchases, which can later be transferred to a variety of airline and hotel partners. Another great option is the American Express Premier Rewards Gold Card, which offers 3 Membership Rewards points per dollar on airfare purchases with a different set of transfer partners.
Have you found airfare to be cheaper in your personal experience?