Summer airfares show signs of spike on inflation pressure
(Bloomberg) – Summer has been expensive with the cost of travel and just about everything else skyrocketing. Now consumers are reducing their flights.
US airline bookings fell 2.8% in June compared to May, according to data collected by Adobe Analytics. Online spending for tickets fell 5.7% to $7.9 billion over the same period.
One of the main culprits is rising ticket prices, which consumers have endured for months, said Vivek Pandya, principal analyst at Adobe’s Digital Insights. Although average airline prices fell 6.4% in June, they are still up considerably for the year and above pre-pandemic levels after holidaymakers went on a buying spree before the start of the summer season.
“We see consumers having to deal with inflation in many different areas, including fuel and food prices,” Pandya said in an interview. “They are now a little more reluctant to continue booking at this rate that they were booking earlier in the year.”
That means consumers looking for better deals on flights may have better luck in the coming months than they did in the spring. But the great rates available earlier in the pandemic aren’t expected to return anytime soon.
Air fares tracked by the US consumer price index fell 1.8% in June from May – although that was after double-digit gains in the previous three months. Business expense management platform TripActions also reported lower prices for domestic flights in the United States, with the seven-day moving average falling $70 from the peak in mid-May. They are still much higher than a year earlier.
Airlines had raised fares this year in part to take advantage of a surge in demand as people resumed travel in the wake of the pandemic. They also passed on higher fuel and wage costs. Firms projected confidence that bookings will remain strong through the end of this year, even as fears of a recession grow.
It’s important to remember that demand naturally starts to slow at this time of year, Delta Air Lines Inc. chief executive Ed Bastian said last week.
“We are now selling in the later part of summer, already early fall, which seasonally is a bit less demand than what we saw at the start of the spring and summer surge,” declared Bastian during a conference. call. “The pricing environment, it continues to be healthy.”
Some people whose summer fares have been “expressed” will be eager to book flights for the fall, Delta President Glen Hauenstein said.
Delta and other airlines have also had to refrain from scheduling more flights to reduce delays and cancellations as staff numbers are still constrained by Covid-19 cases and competition for new hires. Despite the surge in demand, an S&P 500 index of major US airline stocks has fallen 16% this year on fears the industry may be able to continue passing on rising costs to consumers.
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