Why Are Airline Tickets So Expensive Right Now?

The price of air tickets continues to increase. With the measures put in place due to the COVID-19 pandemic gradually being relaxed in many areas, there seems to be a surge in travel desires, hence the increase in demand for flights. Regrettably, there are still fewer flight operations than pre-pandemic, which means that supply cannot keep up with great demand. This disparity is the primary cause of the increase in airfare prices in the market since there is an excess supply than demand.

One primary way that airlines have been cutting down on capacity is the continuous issue of staff scarcity, most notably pilots. Redundancy packages with early retirement were especially appealing to many senior pilots during the downturn due to the pandemic. Regional airlines that provide the first officer pilot positions with the major carriers experienced an increased training backlog because of the flight school and simulator closures resulting from the pandemic, thereby reducing the throughput of new pilots to replace the depleted ranks. Some of the major carriers that have been affected by a few pilots are Delta, Alaska, and JetBlue, and due to increased demand for summer flights, several airlines have been compelled to slash their summer schedules. In this regard, the reduction is computed to be 2 percent of the normally planned capacity for Alaska Airlines. When the capacity is constrained, the price is bound to rise each time there is high demand for the product.

Another factor that cannot be overlooked is the cost of fuel, which is the dominant factor for the increased price of tickets. Jet fuel costs have increased by more than 50 percent since the beginning of the year due to the Russia-Ukraine conflict and global oil shortage. Being a major expense for airline companies where fuel costs range from 25 to 30 percent of the operational cost, any fuel price increase is immediately reflected in the fares. Ongoing fluctuations in oil prices and the aggravating geopolitical tensions make it difficult to expect a decrease in the prices for jet fuel that will sustain the higher airfares.

Lack of competition also partly contributes to price hikes. Since the major cause of lower prices is the existence of many competitors, it is apparent that when there are few competitors, there is a high chance that prices will rise. Losing its commuters earlier on, several regional carriers which include ExpressJet, Trans States Airlines, and Compass Airlines, went out of business. Another area is that major airline companies have also seized the opportunity to pull out unprofitable routes, mainly those facing LCC competition. Fewer competitors also imply that the remaining airlines are not under much pressure to make their fares affordable to the public and may charge higher on monopoly routes. This has created a great opportunity for the airlines that are still in business to fully capitalize on the increasing travel demand.

Restrictions that emerged during the virus outbreak also influenced ticket prices in the recovery period of air travel, and not in a positive manner for some. Several Asian countries put travel restrictions on infected individuals. The infected individuals were not allowed to travel, and this hindered tourism. There is now a tremendous amount of traffic coming from Asia to North America and Europe because all of these restrictions are gradually being lifted. But airlines have been already cutting down service to such routes for quite some time now, which indicates that they cannot address the demand adequately. Fare prices have consequently increased significantly considering the supply deficiencies. One would expect that it could still take several more months to get the right capacity for these previously closed international routes.

However, this has not made it possible to turn a blind eye to inflation, especially when analyzing the increase in airfares as well. The US inflation rate recently touched a 40-year high, largely implying a decline in the purchasing power of consumers. Airlines™ cost of input such as fuel, aircraft, facilities, and labor have all increased due to inflation, but flat base fares will tell you that other costs are not the issue. However, high ticket prices greater than $800 per airline are attributed to the following primary factors: The basic factor that has contributed to high ticket prices is that the travel demand has greatly increased than the actual capacity of the airlines to provide the services. However, with disposable income threatened by the inflation factor, consumers consider even the fare hikes due to supply-demand conditions as more painful.

Future projections of ticket prices are also equally high and are expected to remain high right through 2022 and possibly even 2023. Travel demand is again on the rise as the tourism season gets into full swing during the summer holidays. TSA checkpoint travel numbers reveal that more people are flying and they are traveling at a rate that is near ninety percent of the pre-pandemic levels, which means that there is no letup in demand. And, quite understandably, there is no indication from airlines to suggest that they are planning to increase the rate of capacity expansion. While some consumers may be unable to afford the high prices set for a plane ticket for the time being, it seems that airlines are still managing to get passengers on their planes. Little discounting is necessary under these circumstances.

The pandemic was not only a disruption of the regular operation of the airlines but also the fundamental existence of most of the companies. After seeing a dramatic drop in passengers and the imposition of stringent measures to stem the virus spread, the carriers were just struggling to stay afloat until the recovery of demand. That notion of travel demand revival has, however, come at a time that has left airlines unready for the boom. Yet, problems such as staffing deficiencies, high input costs, shifts in international market dynamics, a low number of competitors, and high ticket prices make the path toward longer-term industry stability uneven. The passengers of the airline companies must endure a period of relatively high airfare charges during the ongoing recovery process. Yet, costs cannot keep increasing and should eventually stabilize as the effects of the pandemic become fully implemented.