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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?
The American Express Platinum card has some of the best perks out there: cardholders enjoy the best domestic lounge access (Delta SkyClubs, Centurion Lounges, and Priority Pass), up to a $200 annual airline fee credit as well as up to $200 in Uber credits, and mid-tier elite status at SPG, Marriott, and Hilton. Combined with the 60,000 point welcome offer -- worth $1,140 based on TPG's valuations -- this card is a no-brainer for frequent travelers. Here are 5 reasons you should consider this card, as well as how you can figure out if the $550 annual fee makes sense for you.
- Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
- Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
- 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
- 5X Membership Rewards points on prepaid hotels booked on amextravel.com.
- Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
- Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
- $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
- Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
- $550 annual fee.
- Terms Apply.
- See Rates & Fees