During the early days of the summer travel season, the price of plane tickets experienced a significant decrease, extending a trend as airlines capitalize on reduced jet fuel costs.
According to the U.S. Bureau of Labor Statistics’ latest data released on Wednesday, airfares in June witnessed an 8.1% decline compared to the previous month. This marks the third consecutive decrease and the most substantial drop since last July.
It is the second-largest monthly decline since April 2020, when the airline industry faced a sharp decline in travel demand due to the initial outbreak of the pandemic.
In comparison to the previous year, airfares in June experienced a dramatic 18.9% drop.
These declines coincide with the decrease in fuel prices, providing airlines with an advantage as they gear up for an anticipated surge in summer travel that is projected to rival the record levels seen in 2019. Jet fuel prices have plunged by 57% this year, based on the current rate for immediate purchase in New York Harbor. Fuel costs, alongside labor expenses, represent the two largest expenditures for airlines, and historically, fares have corresponded with fluctuations in fuel prices.
TD Cowen predicts that approximately 275 million individuals will travel between May 25 and September 4. This projection surpasses the numbers from both 2019 by 7.4% and the previous year by 19%.
According to data from the Transportation Security Administration, U.S. passenger counts, which had been trailing behind the record levels seen in 2019 since the onset of the pandemic in early 2020, have now largely rebounded to match pre-pandemic levels in recent months.
The resurgence of travel in the United States gained momentum as the pandemic subsided in 2021 and has shown no signs of diminishing. Remarkably, the industry has appeared unaffected by inflation and economic deceleration, thanks to consumers utilizing their pandemic savings for travel.
Initially, the industry’s recovery was propelled by domestic and nearby international trips during the early stages of the pandemic. However, more recently, the industry has received a substantial boost from the surging demand for international travel, particularly to European destinations. As countries have progressively lifted lingering Covid-related restrictions, the appetite for travel to Europe has soared, providing a significant boost to the industry.
On Thursday, Delta Air Lines is poised to become the inaugural major U.S. carrier to release its second-quarter results, offering insights into the demand trends during the busy summer season. In the previous month, the airline disclosed that 55% of its available seats for the current quarter have already been reserved. This includes 70% for long-haul international flights and 40% for domestic routes.
Deutsche Bank anticipates that a collective group of 11 U.S. carriers will announce a historic $58 billion in revenue for the second quarter.