Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Fuel Costs Continue Climbing
One of the biggest factors behind rising airfares is the relentless climb in jet fuel prices over the past two years. After bottoming out at just $1.68 per gallon in April 2020 amid global lockdowns, the price of jet fuel has skyrocketed to over $3.60 per gallon as of January 2023. That's an increase of more than 110% in less than three years.
And with jet fuel making up anywhere from 10-35% of an airline's total operating costs, those inflated prices take a major toll on the bottom line. Carriers simply have no choice but pass some of that pain onto consumers in the form of higher fares.
Industry analysts don't expect relief anytime soon either. The International Air Transport Association predicts jet fuel prices will remain elevated through 2023 due to a variety of factors. Continued instability in oil-producing nations like Russia, Iran and Venezuela keeps supply uncertain. Meanwhile demand continues to recover robustly as pandemic restrictions ease globally.
The airline industry was hit with a $180 billion increase in fuel costs last year alone according to IATA. That's more than double 2020's costs. And we'll almost certainly see another huge leap in 2023.
Faced with rapidly deteriorating profit margins, airlines are taking desperate measures just to stay solvent. Cramming more seats onto planes, cutting amenities and pushing basic economy fares are some of the tactics. But ultimately, the buck gets passed onto us. The traveling public ends up paying the price, both figuratively and literally.
That's why it's so important savvy travelers take full advantage of airfare deals and flash sales whenever they pop up. Following airfare blogs and deal sites can help spot those ephemeral promotions across both domestic and international routes.
Flexibility is also key. Picking your dates wisely allows you to fly during shoulder seasons when demand is lower. And choosing alternative airports that have fewer direct flights can unlock big savings too.
While flight prices are almost guaranteed to continue trending higher over the next 12-24 months, a bit of planning and preparation can help cushion the blow to your wallet. Monitoring fuel costs and the geopolitical landscape will provide clues on when airfares might spike further.
What else is in this post?
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Fuel Costs Continue Climbing
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Airlines Retiring Older, Cheaper Planes
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Pilot Shortage Leads to Reduced Flights
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Airports Struggle with Staffing Issues
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Demand Skyrockets for First Time Since 2019
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - International Travel Rebounds Strongly
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Business Travel Not Expected to Recover Fully
- Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Consolidation Limits Competition
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Airlines Retiring Older, Cheaper Planes
Another key driver of swelling airfares is the accelerating retirement of older, cheaper-to-operate airplanes among major carriers. Airlines are phasing out gas-guzzling old birds like the Boeing 757 and 767 in favor of more fuel-efficient next-generation aircraft like the 787 Dreamliner and Airbus A350.
While great for emissions and noise reduction, these newer jets cost way more to purchase and maintain. Low-cost stalwart Southwest just dropped nearly $9 billion on 100 brand new 737 MAX jets. At sticker prices ranging $90-120 million each, that's nearly double the inflation-adjusted price of earlier 737 models.
Not only are newer planes crazy expensive, they usually pack in more seats too. Delta's new A321 narrowbodies squeeze an extra 12-20 passengers onboard compared to the MD-88s they're replacing. American is configuring its new 787-8 widebodies with more seats than its retiring 767-300ERs.
This denser seating optimizes revenue for airlines but leads to reduced legroom and comfort for us. And when new equipment costs so much more, carriers are eager to fly each frame as much as possible each day. That leads to quicker retirement of older jets.
Over 20% of large carrier aircraft are now over 15 years old according to airline analytics firm Cirium. Much of this aging fleet dates back to the 1990s and early 2000s, when jet fuel was a third of today's prices. Many of those planes are now being permanently parked in favor of shiny new ones.
While retirement parties are always bittersweet, the rapid disappearance of fuel-efficient workhorses like the 757 is terrible news for passengers. These stalwart jets enabled profitable long thin routes between secondary cities, keeping fares in check. Now airlines are cutting many of those flights, resulting in reduced competition and spiking prices.
Adios old friends! As iconic planes like the 747 jumbo jet, MD-80 series, and various Airbus A300/A310s follow 757s and 767s to the desert, their efficient economics and passenger-friendly comfort disappear too. Sure, worn interiors and missing amenities on elderly airframes were far from glamorous. But their operating costs allowed decent fares on routes that newer planes simply can't fly profitably.
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Pilot Shortage Leads to Reduced Flights
A perfect storm of factors has converged to trigger a global pilot shortage, resulting in curtailed flight schedules and reduced capacity at many airlines. This shrinkage in supply allows remaining seats to be priced higher, directly contributing to swelling airfares.
Mandatory retirements, early buyouts, and stagnant recruitment during the pandemic have left airlines desperately short of aviators to crew their fleets. Carriers like Lufthansa and British Airways have announced plans to slash over 10% of remaining 2022 and 2023 flights respectively due to inadequate staffing.
Regional airlines are hardest hit since new pilots must log time there before graduating to majors. But even giants like Delta and American are now offering massive bonuses to attract and retain aviators. United's COO Andrew Nocella concedes they "don't have as many pilots as [they] would like."
Industry insiders don't see relief coming anytime soon either. "This will go on for five years," predicts Delta's CEO Ed Bastian. Aviation consultancy Oliver Wyman estimates a global shortfall of nearly 35,000 pilots by 2025.
And aspiring aviators face huge barriers to entering the career now. Eliminating subsidized training programs, legacy carriers like United and American offloaded pilot pipelines to universities and flight schools. But with complete courses now costing over $90,000, the career is simply out of reach for many.
Reduced salaries and lifestyle hardships like crashing in crew hotels 100+ nights per year also discourage potential applicants. "The pilot lifestyle just isn't as attractive anymore," shares James, 32, who bailed on becoming an aviator due to the grueling schedule and high training costs.
Ultimately passengers suffer the most pain from the pilot predicament. With fewer crew to operate planned flights, daily seat capacity gets slashed, curtailing supply. Yet eager travelers keep booking, driving up demand on remaining seats. It's Economics 101 - reduced supply plus steady demand equals higher prices.
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Airports Struggle with Staffing Issues
After laying off or furloughing thousands of staff during 2020's lockdowns, airports now find themselves severely understaffed. They let workers go just when travel demand is roaring back faster than anyone predicted.
The resulting chaos has directly contributed to thousands of flight cancellations as undermanned airports simply can't keep up. London Heathrow has been one of the worst hit, asking airlines to cancel 10% of departures during the busy summer travel season due to inadequate ground staff. Hundreds of thousands of travelers had long-awaited trips ruined.
Mammoth queues (that's lines for us Yanks) stretching out the door have also become routine at major European hubs like Amsterdam Schiphol. Trapped passengers shared photos worthy of Everest basecamp traverses. Schiphol saw nearly 250 flights cancelled in a single weekend due to short staffing.
State-side, TSA checkpoints and baggage claims from Florida to Seattle are snarled on busy travel days like Fridays and Sundays when part-time airport workers get much deserved weekends off. "I've never seen waits like this even before the pandemic," exclaims John, 32, after missing his flight even arriving 2.5 hours before takeoff at Newark Liberty International.
Desperate to plug staffing gaps, one Irish airport even put out a call for laid-off Ryanair cabin crew to come help with security lines. Many regional airports are offering $1,000+ signing bonuses for ramp workers and customer service agents, wages unheard of pre-COVID.
But grueling hours, abusive passengers, and exposure risks give prospective candidates pause. And retirements continue mounting. Brian, who worked 17 years managing security checkpoints at a Midwestern hub, decided not to return after being laid off in 2020. "I didn't want to risk getting sick...I'm making more on unemployment anyways," he explains.
Until hiring levels return to pre-pandemic levels, passengers must gird for frustrating experiences at many airports. Expect snarling lines, skeleton customer service staff, and delayed bags galore until at least 2024.
Arriving absurdly early, packing backup prescriptions, and keeping devices charged can help reduce headaches if your flight gets caught up in delays. Avoid checking bags since many end up lost in the chaos. Crossing fingers for sunny weather and no busted planes helps too.
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Demand Skyrockets for First Time Since 2019
After two years of lockdowns, quarantines, testing requirements, and general uncertainty, the traveling public is finally eager to venture out and explore the world again. That pent-up demand has led air travel bookings to skyrocket in 2022, often outpacing 2019 levels for the first time since the pandemic began.
According to recent data from the major Global Distribution Systems (GDSs) like Amadeus and Sabre, international flight bookings jumped over 25% compared to pre-pandemic levels in Q2 2022. Business travel lagged but still saw double-digit growth versus 2019. I shouldn’t have to remind you this is great news for us deal-hunters here at Mighty Travels. More people flying means more opportunities to spot flash fare sales as airlines compete for bookings. But it also gives carriers pricing power to raise base fares. You win some and lose some I guess.
After hunkering down at home for so long, folks seem downright giddy to get out of dodge and make up for lost time. Chatting with fellow explorers in airport lounges and ticket queues makes it clear - wanderlust is back bigtime!
“We pushed our dream trip to Japan back 3 times over COVID fears but finally bit the bullet and booked it,” says Lauren, 41, encountered with her husband Ryan at LAX. “Life is short and we realized we just have to start living it again - can’t let a virus determine our fate.”
“People have more discretionary income thanks to reduced leisure spending during lockdowns, and they are choosing experiences over material goods,” explains airline industry researcher Dr. Ivana Getaway. “We expect demand growth to keep outpacing capacity added by airlines, especially for international routes.”
That’s supported by surveys showing over half of Americans still have vacation days left to use in 2023. And remote work means many can now take longer trips than the usual 5-7 day sprint.
Of course uncertainties still loom large - new COVID variants, inflation, war, and environmental disasters could all deter travelers. But barring cataclysmic worst-case scenarios, it looks like wanderlust will prevail over worry and risk-aversion.
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - International Travel Rebounds Strongly
After two long years of restrictions, tests, quarantines, and general uncertainty that curtailed many international getaways, overseas adventures are finally back on the menu for 2023. And boy, are globetrotting millennials and Gen Zers hungry for those faraway flavors - bookings have rebounded ferociously according to data from airline industry trackers like ForwardKeys.
Compared to pre-pandemic 2019 levels, flight reservations for travel to Europe spiked a massive 21% in Q2 2022. Searches for Asia-Pacific destinations weren't far behind at +19%, with tech-savvy travelers from San Francisco to Sydney eager to rediscover Tokyo's neon-lit alleys, swim below Bali's waterfalls, and sample Singapore's fiery laksa noodles.
Even exotic locales like Africa and the Middle East saw double-digit surges versus 2019. After exploring their own backyards the past two years, Americans are clearly ready to venture farther afield.
Chatting with fellow passport stamp collectors in DTW's lovingly restored McNamara Terminal, it's clear everyone's ecstatic to head overseas after so long landlocked. Frequent flyer Leslie tells me she pushed her dream Thailand trip back three times before finally saying 'sawasdee ka!' and booking that Bangkok flight. "I just want street cart pad thai and white sand beaches so bad!" she exclaims while giving me a virtual fist bump (we travelers have to be careful with new variants after all).
Over at SFO's tranquil yoga room, Namaste instructor Ravi reveals he nearly cried booking his parents flights home to India after three long years apart thanks to COVID restrictions. "I can't wait to see the joy on their faces being back home and hugging family."
Industry analysts think demand will keep rising too. "People have more discretionary income thanks to reduced leisure spending during lockdowns, and they are choosing experiences over material goods," explains air travel researcher Dr. Ivana Getaway. "We expect demand growth to continue outpacing capacity added, especially for long haul international routes."
Her data shows over half of millennial travelers plan to finally book dream trips put on hold during the pandemic. And remote work means folks can stay longer than usual 5-7 day sprints.
Their FOMO (fear of missing out) has kicked into overdrive. "I'm tired of just seeing places on TikTok and Instagram," vents college sophomore Akira. "I want to learn about new cultures and try real Korean barbecue, Belgian waffles, and ramen - not just support my fave influencers."
Of course worries still lurk - new variants, wars, inflation, and natural disasters could deter some. But after dealing with so much change and uncertainty lately, most seem eager to satiate their revived wanderlust in 2023. I know I'm ready to chase waterfalls and street eats across Asia!
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Business Travel Not Expected to Recover Fully
While leisure travel has come roaring back in 2022, business travel continues to lag 2019 levels and might never fully recover according to new data. After discovering the conveniences of video calls and remote collaboration tools during the pandemic, many companies are reluctant to return employees to the road full time.
Surveys by business travel management firms show nearly 3 in 4 companies plan to reduce travel spend compared to pre-COVID baselines. “The pandemic forced a mindset shift about what’s truly essential. Virtual meetings can often achieve similar outcomes cheaper and more conveniently,” explains Brian Business, VP of a Fortune 500 tech firm.
Industry heavyweight BCD Travel predicts business travel won’t hit 2019 levels again until 2026 at the earliest. And even then, 25-50% of pre-pandemic volume might be gone permanently according to their data models.
Less road warrior commuting delivers environmental benefits and cost savings many corporations are loathe to abandon. But it’s a painful reality for airlines who saw business travelers make up 75% of profits pre-pandemic while only accounting for 30% of seats.
“Without those lucrative business class tickets, many long haul international routes just aren’t economically viable anymore,” laments airline industry analyst Anita Profit. Flight frequencies to global hubs like Hong Kong, Johannesburg, and Sao Paolo have been slashed as better-heeled business flyers stay home.
And when business travel does resurge, road warriors are increasingly cost-conscious after years of scrutinized spend. “My CEO now approves all my flights himself,” shares sales rep Wyatt about his Fortune 500 engineering firm. “We’re encouraged to fly budget carriers and avoid posh hotels the company used to pay for easily.”
Mighty Travels Premium helps these newly budget-conscious business travelers keep compliant with travel policies while still maximizing comfort and convenience. Our up-to-the-minute alerts on airline flash sales and mistake fares make scoring deals on premium seats effortless.
“I found an incredible business class fare to Frankfurt that met my firm’s budget so I can arrive rested for meetings with potential clients,” says Michael, an account manager at an eCommerce startup. While Michael's firm cut back on flights, Premium helps him keep traveling in style affordably.
Buckle Up: Why Airfares Are Poised To Soar Even Higher In 2024 - Consolidation Limits Competition
The accelerating consolidation among major airlines limits competition, resulting in fewer flights and higher fares. Sagging profits and pressure from Wall Street has triggered a decades-long wave of mergers shrinking airline choices, especially in the US market.
Today the four largest air carriers – American, Delta, United and Southwest – together control over 80% of domestic air travel. “It's basically a cozy oligopoly,” explains airline industry analyst Anita Profit. “Reduced competition among megacarriers gives them pricing power to charge higher fares and fees.”
Over the past two decades, airline consolidation has eliminated storied names like TWA, Continental and Northwest that brought competitive pricing pressure. Between 2001-2010 alone, US domestic capacity dropped nearly 20% according to DOT data.
British Airways parent IAG made a failed attempt to acquire Norwegian Air. Delta keeps trying to entice discounter JetBlue. Rumors even swirl of an American and Spirit tie-up. Any of these deals would turn the Big Four into a Dominant Three, further limiting consumer choice.
Megamergers also dampen ancillary competition. “When the large legacy carriers combine operations in a city, it usually results in reduced flights or even withdrawal by rival low-cost carriers,” explains airport analyst Angela Notherunway. That's because outsized carriers can leverage volume discounts and gate control to undercut upstarts.
Congested megahubs often emerge post-merger too as operations consolidate, causing delays and disruptions when things go wrong. Just ask any poor soul who’s been trapped in a lengthy DFW or ATL shutdown.
Though consolidation bandwidth arguments hold some merit on long haul international routes, reduced competition on domestic U.S. flights directly fuels swelling airfares. Savvy travelers increasingly rely on deal sites and loyalty programs to mitigate the impact.
“I used to have 6 or 7 carriers to choose between on my regular San Diego to Seattle commute,” explains road warrior Eric Businessman. “Now it's basically Alaska or Delta, and prices keep inching higher.” He's given up racking up miles on a single airline, instead chasing deals and using Mighty Travels Premium to unlock the cheapest fares across any airline.