U.S. air ticket prices soared 18.6% month-on-month in April, an unprecedented increase

While airfare prices are rising at their fastest pace in decades, Americans are unconcerned and continue to prepare for their summer travel plans.

Airfare prices rose 18.6% in April from the previous month, the largest month-on-month increase on record, according to the Bureau of Labor Statistics. They were one of the biggest contributors to the 8.3% rise in the U.S. CPI last month.

The air fare index rose 33.3% year-on-year, the largest year-on-year increase since 1980. Although price levels are subdued in the same period in 2021 due to the raging epidemic.

CICC pointed out that the surge in demand for offline travel is the main contribution to inflation. High-frequency offline data shows that the number of people undergoing TSA security checks has approached the pre-epidemic level, and the hotel occupancy rate has increased to 64% (68.4% in the same period in 2019), but the increase in air tickets has been far behind. Super hotel, which is inseparable from the previous surge in jet fuel prices.

According to the Financial Times, Jeffrey Goh, CEO of the global airline alliance Star Alliance, said:

But Goh also said they were not deaf and blind. They know that the cost of living and rising inflation are risks to the industry’s recovery.

Offline travel demand surges, industry recovery is imminent

Savanthi Syth, an analyst at Raymond James, also said: “Fuel costs, which used to account for 25% to 40% of airline costs, are now almost 80% higher year-on-year.”

None of the three major U.S. airlines—American, United and Delta—has hedged fuel costs, reporting that they successfully passed the cost on to passengers.

But Americans’ enthusiasm for travel remains unabated.

Michelle Meyer, chief U.S. economist at Mastercard Economics, said travel spending is growing across the board, with airfare rising the fastest, so booking momentum should continue.

She added that strong wage growth and rising savings meant consumers ” may be able to tolerate higher prices for longer , especially for the types of consumption they prioritize”.

Despite inflationary pressures on consumers, U.S. airlines remain optimistic about summer travel and its overall recovery due to previously pent-up travel demand. Airlines report that customers are now more willing to pay for premium seats.

The recovery in business travel is also accelerating, with roughly 85% of U.S. domestic business travel revenue recovering as of the end of March.

“Demand is the strongest we’ve ever seen,” American Airlines CEO Robert Isom said on an earnings call in April.

The three major U.S. airlines are expected to be profitable in the second quarter, with United forecasting record quarterly revenue.

Cowen analyst Helane Becker said:

Limiting factors still exist

At the same time, Syth also said that American Airlines had 7% fewer seats in the second quarter than the same period in 2019. Seats will also be limited due to staffing issues such as rising fuel prices and bottlenecks in pilot training.

Becker also expects prices to rise at a rate of 7% per month until at least June, which Americans can live with until the summer, “but we’re concerned about bookings for September and October.”

CICC believes that the demand for travel tickets may remain resilient, but its strength is unsustainable.

As airlines raise wages to attract and retain workers, their labor costs are also rising. Aircraft shortages have further impacted flight plans: American has cut flights as deliveries of its Boeing 787 Dreamliner continue to be delayed; while United’s Boeing 777 fleet, which accounts for 10% of its total capacity, is still on the verge of an engine accident last year. grounded state.

This article is reprinted from: https://news.futunn.com/post/15554534?src=3&report_type=market&report_id=205671&futusource=news_headline_list
This site is for inclusion only, and the copyright belongs to the original author.