Ouch: US airfare spikes 18%, the highest one-month jump ever
Already expensive airfares are getting even more expensive.
New government data released Wednesday showed airfare jumped 18.6% on a seasonally adjusted basis from March to April, one of the largest categorical increases in the entire consumer price index and the largest-ever month-over-month increase for airfare. The spike from March to April follows another large jump — 10.7% — from February to March.
The "sold-out summer" is already well underway.
Want more airline-specific news? Sign up for TPG's free biweekly Aviation newsletter.
Airfare is skyrocketing for a few reasons, perhaps most importantly because the public is not resisting the higher fares — both at full-service network carriers such as Delta Air Lines and ultra-low-cost carriers such as Frontier Airlines. Airlines took a massive hit to their balance sheets during the COVID-19 pandemic and are taking advantage of very high demand to boost fares to shore up balance sheets and retire debt.
“We haven’t seen a lot of resistance to the price points that we have in market, and our goal is to have reasonable price points in market up to day of departure,” Delta President Glen Hauenstein said at last month's earnings call, adding that the company believes its customers are willing to pay more for a higher level of service compared with its competitors.
At Frontier, the average customer paid just shy of $70 in ancillary charges — things like bag fees and seat selection — in the first quarter, 21% more than passengers spent in the first quarter of 2019.
Airlines are also facing high jet fuel prices due to both the war in Ukraine and more normal market fluctuations — and are passing some of those higher costs on to consumers.
Finally, capacity is becoming constrained for multiple reasons, which naturally leads to higher fares when demand stays strong. American Airlines is being forced to run a smaller summer schedule because some of the Boeing 787 Dreamliners it has on order are being held up pre-delivery by the Federal Aviation Administration for quality and safety reasons. United Airlines just suspended seven long-haul routes for June because some of its older Boeing 777s continue to be grounded — well after the airline anticipated their return. Also, an ongoing pilot shortage means that airlines are also being forced to trim the schedules of the regional airlines that operate flights for them.
More: Why are airfare and hotel rooms so expensive right now?
This would all normally create a bleak picture for airlines. But with consumers willing to go along with the higher fares — for now, at least — it's actually good business for airlines, which are now largely expecting quarterly profits for the rest of 2022 — their first real stretch of profitability since 2019.
If you're looking to book travel, prepare for some sticker shock. The best advice we have right now is to be flexible if possible, and search around for various dates and trip lengths before booking your flights.
Delta's Hauenstein agrees.
“If you’re looking for lower fares, you have to be flexible in terms of which days you’d be willing to fly,” he said.