Cheap airfares are hard to find, and it might not get much easier in 2023.
Between staffing shortages, aircraft delays and airlines’ conservative schedules after costly travel meltdowns, available seats are limited. Airlines are also passing along higher fuel prices and other costs to customers, keeping ticket prices elevated. But travelers, at least so far, are willing to pay the price.
“Holiday flights are going to be expensive once again,” said Scott Keyes, founder of flight-deal site Scott’s Cheap Flights. “The pricing power has shifted back to the airlines for winter holiday travel.”
Domestic airfares peaked in May, according to fare-tracker Hopper, but they’re on the rise for the holidays compared with last year. Domestic airfare deals over Thanksgiving are averaging $274, up 19% from 2021, while domestic roundtrips over Christmas are going for $390, up 40% from last year, Hopper says.
Windfall for airlines
The three biggest U.S. airlines — Delta, United and American — each reported profits and record revenue for the third quarter. They all expect to remain profitable through the end of the year, as strong bookings and spending on co-branded credit cards continue.
It’s a far cry from early in the Covid pandemic when travel collapsed and the industry was careening toward record losses. Airlines were propped up by $54 billion in taxpayer aid to weather the crisis and urged workers to take buyouts.
“Demand has not come close to being quenched by a hectic summer travel season,” Delta CEO Ed Bastian said on the carrier’s quarterly call last week.
Bookings have remained resilient despite high inflation and rising interest rates, as consumers refuse to give up getaways, and some even find new ways to travel thanks to more relaxed office attendance policies.
“With hybrid work, every weekend could be a holiday weekend,” United CEO Scott Kirby said on the company’s quarterly call Wednesday. “That’s why September, a normally off-peak month, was the third strongest month in our history.”
Other travel patterns have changed, too. Airlines say they’re maintaining more of their trans-Atlantic schedules as trips to Europe stay popular well into the fall, giving travelers a chance to avoid the crowds at popular tourist destinations. United and Delta recently said they will ramp up spring and summer flying across the Atlantic, a sign they expect demand to continue to recover well into 2023.
Over the holidays, customers appear to be more flexible, too, flying outside of traditional travel days like the Wednesday before Thanksgiving or the Sunday after.
“If you go look at our Thanksgiving schedule right now, there’s less peak-to-trough variability there than certainly I’ve seen in the schedule for a number of years,” Vasu Raja, American’s chief commercial officer, said on an earnings call on Thursday.
Limited seats
Delta doesn’t expect to fully restore its 2019 capacity until next summer. American said Thursday that it would likely get back to between 95% and 100% of its pre-pandemic capacity next year.
For the fourth quarter, American is planning for its capacity to be down as much as 7% compared with 2019, while United and Delta are planning to fly as much as 10% and 9%, respectively, below their levels three years ago.
All three airlines reported higher revenue than 2019, despite flying smaller schedules — a sign of stronger fares, though higher costs have taken a bite out of profits. Executives said customers are even spending more to upgrade to more spacious seats.
Originally published on CNBC.com
