According to the U.S. Bureau of Transportation Statistics, U.S. airfares surged 37.8% in May from a year earlier, compared with weaker fares a year earlier, when travel demand was just starting to pick up after the U.S. aggressively promoted vaccinations.

Data show that air ticket prices rose by 12.6% month-on-month in May, 18.6% in April and 10.7% in March.

Analysts do not expect airfares to drop significantly due to rising fuel costs and staff shortages. In addition, the number of U.S.-operated flights decreased by 12% compared to summer 2019, but bookings for business travel and family vacations surged.

“Demand is breaking records,” Delta CEO Ed Bastian said last week, adding that all markets, including leisure travel, business travel, and international travel, have seen a sharp recovery in demand.

What does this mean for airline stocks?

Airlines will update their June metrics and unit revenue forecasts in the first week of July, when it will be possible to see how much fuel and labor inflation has pushed up airfares. Some airlines are more vulnerable to fuel costs than others.

It is understood that the US CPI in May increased by 8.6% year-on-year, a new high since December 1981, and is expected to be 8.3%. Earlier, American Airlines (AAL.US) and others said that although second-quarter revenue is expected to grow faster than expected, rising fuel costs continue to plague the industry.

Despite the headwinds facing the airline industry, Spirit Airlines (SAVE.US), Southwest Airlines (LUV.US), United Continental (UAL.US), Delta Air Lines, American Airlines and others have outperformed the S&P this year 500 Index.

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