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Airfare is about to get much more expensive, experts say. Here's what you need to know

Jan. 26, 2022
4 min read
a toy airplane sits on top of passports and boarding passes
Airfare is about to get much more expensive, experts say. Here's what you need to know
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Prices all across the broader economy are in flux right now, with supply chain issues, inflation, and wildly vacillating stock markets leading to higher costs on everything from groceries to cars.

One area where prices haven't been as affected: airfare. In fact, the average cost of airline tickets, which tend to be relatively variable by nature, have been fairly stable.

But that may be about to change.

According to data compiled by travel booking site Hopper, domestic airfare is projected to increase by as much as 7% monthly through June, reaching — and passing — 2019 levels by April.

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International airfare, meanwhile, is expected to rise an average of 5% per month.

"If you are planning spring break travel, you should be tracking prices and book soon," Hopper economist Adit Damodaran, who compiled the report, told TPG in an emailed statement. "Spring prices will only get higher in coming weeks as the Omicron wave ends. In short, the best deals for spring break trips are out there right now. For summer travel, travelers should also be monitoring with price tracking tools like Hopper, but there is more time before you need to book."

Some of the increase can be attributed to normal seasonality, with demand typically falling in January following the holidays, only to increase leading up to the busy summer travel season.

This year, however, demand fell even further than normal because of the omicron variant, while a steep demand recovery in the coming months will contribute to higher fares, according to Hopper's Consumer Airfare Index report.

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The slump in demand, meanwhile, hasn't stopped prices from climbing. For the week ending Jan. 17, published fares were up 9.7% over the same week a year previously, while demand was down 27%, according to data from Helane Becker, airline analyst at Cowen, in a research note published Jan. 23.

Additionally, surging jet fuel prices will likely contribute to higher airfare — prices increased 60% through 2021, according to Hopper. As jet fuel prices have risen in the past, consumer airfare prices have typically increased as well. Fuel represents roughly 30% of airlines' operating expenses, according to Cowen airline analyst Helane Becker, but can be a larger percentage as prices rise.

Fuel prices typically have an impact on airfares, which, while potentially positive for airlines' bottom lines, means higher costs for consumers.

"We continue to believe higher fuel costs are a medium- to long-term positive for North American airlines given the result typically reduces supply and boosts ticket prices, which we believe positively influences earnings multiples – though again, clarity in this regard is more likely after the new year, in our view," JPMorgan airline analyst Jamie Baker wrote in a Jan. 17 research note.

Broader inflation throughout the economy could also have an impact. A 7% inflation rate over the past year, the highest since 1982, has sent consumer prices higher.

While it's tempting to point to the overall consumer price index as a driver of higher airfares, a direct comparison can be murky, American Airlines chief revenue office Vasu Raja said on the airline's earnings call last week.

"This industry has a long history with inflation where it hasn't always bled so cleanly into fares," Raja said. "But it's early to tell and how — whether this level of inflation stays or not, it's even early to go and guess at that, too."

Related: Omicron update: When will international travel return? A country-by-country guide to coronavirus recovery

Notably, the pricing increase is expected to occur most significantly as the current wave of omicron variant-driven cases begins to recede, Damodaran told TPG.

"From an industry perspective, we are in a pattern where during a COVID variant we have suppressed demand, but once it wanes we see pent up demand take off," Damodaran said. "While we once viewed travel bookings as starkly either pandemic or post-pandemic, we are now seeing that bookings follow the waves of the variants. There are times where consumer confidence is high and consumers are eager to book, and other times where they are more hesitant."

"Typically, over the past two years, this swing is part of a 2 to 3 month interval," he added.

Featured image by Getty Images
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Cons

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  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
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Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
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  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

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  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
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Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023