It’s pretty obvious that flight prices have skyrocketed. Those great deals on flights you used to be able to snag seem to be long gone. Pent-up demand has caused a chaotic summer of travel, which ranges from delays, cancellations, lost baggage and increased flight prices.
According to the U.S. Bureau of Labor Statistics’ Consumer Price Index, airfare prices recently hit their largest one-month jump in history – climbing 18.6% from March to April 2022. Since then, prices don’t seem to be going down, either. In late March, prices were up some 40% from January. Over the last year, prices are up 25%.
Unfortunately, sky-high airfare prices can be attributed to several things.
First, airlines have had to increase their fares due to jet fuel prices, which have gone up considerably. Jet fuel usually accounts for at least 30% of airlines’ operating expenses. Another problem is staffing. Airlines’ staffing issues are not only with flight attendants but also with pilots. Lastly — and perhaps the main reason — flight prices have climbed due to the simple nature of supply and demand.
It’s clear that everyone is ready to return to the skies after the pandemic grounded many travelers for years.
When Flight Prices May Decline
The big question remains, when will we see flight prices go down?
Nobody can say for sure when prices will start to go down. However, some experts expect things to mellow out once summer travel winds down, likely in September or October.
With fuel prices still elevated and the demand for travel still going strong, it could be awhile before consumers see a meaningful reduction in flight prices. While the CPI report for June came in ahead of expectations, we’re starting to see some portions of inflation fall on a month-to-month basis. That includes hourly earnings and core CPI readings.
Crude oil prices have also been under pressure, down more than 20% over the past month. Further, crude is down more than 30% from the high in February. While inflation is still high, we’re seeing some pricing pressure alleviate.
Given that many airlines buy their fuel in advance though, those higher prices may have a lingering effect on flight prices. Worries of a recession may eventually alleviate some of the flight demand as well.
Despite the robust demand and rise in fares, airline stocks haven’t reflected those realities. Delta Air Lines (NYSE:DAL) is fresh off a top- and bottom-line miss and is hovering near multi-month lows.
So are United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL), JetBlue Airways (NYSE:JBLU) and Southwest Airlines (NYSE:LUV). About the only one that’s done well is Spirit Airlines (NYSE:SAVE), and that’s as it has multiple bidders in a takeover attempt.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
