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Why Are Flight Prices So Expensive Right Now?

  • New data indicates that airline prices are going to keep rising through the holiday season.
  • In fact, they are nearing their highest point in five years.
  • Various experts and publications have offered insight on the situation.
"flight prices" - Why Are Flight Prices So Expensive Right Now?

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The airline industry is recovering from a turbulent summer in more ways than one. In late June 2022, a surge of unprecedented flight cancellations pushed airline stocks down. As InvestorPlace Assistant News Writer Shrey Dua reported, the combination of staff shortages and rising fuel costs forced airlines to cancel more than 5,000 flights over Father’s Day weekend, while 27,000 were delayed.

Passengers may have an easier time getting to their destinations now, but the sector is far from out of the woods. As eyes turn toward the holiday season, flight prices are on the rise and not expected to slow anytime soon. The combination of elevated demand and restricted capacity are pushing ticket costs toward the highest point in five years.

Travel costs rising around the holidays is expected due to increasing demand. But this year, airlines are clearly taking precautions to ensure that they aren’t force to impose the type of delays that customers saw this summer. That’s going to mean selling fewer tickets, thereby leading to even higher prices than usual. Forces of supply and demand are going to make it difficult to travel this holiday season. For that reason, travelers will likely start booking tickets months in advance.

One way or another, it will be a complicated season for airline stocks. But let’s take a closer look at what consumers can expect.

Flight Prices Are Only Climbing Higher

In July 2022, InvestorPlace’s Bret Kenwell posed the following question: When will flight prices go down in 2022? The short answer is, they more than likely will not. But just how much can we expect flight prices to increase? Travel platform Hopper recently provided some helpful data on exactly that. As CNBC reports, citing Hopper’s data:

“Average domestic airfare for trips over Thanksgiving is $350, and international round trips are going for an average of $795 — both mark a 22% increase compared with 2019, before the Covid pandemic. … Domestic round-trip tickets over Christmas, which falls on a weekend this year, are nearly a third more expensive than 2019, averaging $463, while international is up 26% to $1,300.”

The company’s lead economist, Haley Berg, provided further insight to Travel + Leisure. As she notes, “Flexible travelers will save the most this holiday season. If you can be flexible on travel dates and fly before and after each holiday week you can save as much as $300 off peak airfares.”

While everyone appreciates savings, the holiday season isn’t a time that many people want to be flexible. And it doesn’t seem as though many Americans want to cut back on their plans to spend time with their loved ones. Phil Dengler, co-founder of The Vacationer, recently spoke to HuffPost about holiday travel trends. As he sees it, the number of people seeking to fly will be higher than it was in 2020 and 2021, though it may not reach 2019 levels.

All signs point toward flight prices staying elevated as we head into the busiest travel time of the year. Although some experts have indicated that certain inflationary trends are easing, that doesn’t mean that things are going to mellow out for the airline sector. One indicator of easing inflation is the fact that gas prices are falling, but that may inspire more Americans to travel by car rather than plane. Regardless of how we examine this issue, it is clear that flight prices are going to keep rising. Investors should brace for more turbulence from the sector.

On the date of publication, Samuel O’Brient did not hold (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.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-are-flight-prices-so-expensive-right-now/.

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