Rising fuel prices may present an obstacle, but the airline recovery in the United States appears to be on track for now.
With the omicron coronavirus variant receding and pandemic restrictions being eased, the airline industry turned a corner last month, according to an analysis by the Adobe Digital Economy Index, which draws on online sales from six of the top 10 U.S. airlines. According to the analysis, ticket sales for domestic flights in February exceeded those for the same month in 2019, a first since the pandemic began two years ago.
“We’re seeing things open up in terms of people’s thinking about travel,” said Vivek Pandya, who led the analysis. “The question now becomes: How much can that momentum continue to push forward?”
Travelers spent an estimated $6.6 billion on domestic flights in February, about 6% more than three years earlier, according to the analysis. The number of tickets sold was up 4%, while fares were up about 5%, lagging overall inflation. Early data indicates that the trends are holding up this month, too.
The data bodes well for airlines, which have been preparing for months for what the industry expects to be a robust summer travel season. It also matches the optimism that several carriers expressed at an investor conference held by JP Morgan on Tuesday.
Consumers appear to be optimistic, too: The number of tickets sold last month for domestic travel between June and August was down just 3% from the number sold in February 2019, according to the Adobe analysis. Most travelers, though, book summer travel closer to the date of departure.
But while hopes are high for the months ahead, there is concern that rising fuel prices and persistent inflation could pressure airlines to raise fares and discourage potential customers from flying.
“Between the fuel impact and the discretionary income impact on leisure travelers, it’s going to slow whatever would have been happening,” said Samuel Engel, a senior vice president and airline industry analyst at ICF, an advisory firm.
While the global price of jet fuel has declined from its recent peak, it ended last week up 19.5% from a month earlier and up about 82% over the last year, according to the Platts Jet Fuel Price Index.
U.S. airlines will try to cover fuel price increases by raising fares, a process that can take months to play out. Carriers are typically limited in how much they can pass on to customers, industry analysts said, but airline executives are more optimistic.
With the rebound being led by leisure travelers, who are far more sensitive to ticket prices than corporate travelers, airlines will have to tread carefully when it comes to raising prices.
Consumers facing higher prices for goods and services may not have much left to spend on vacations, experts said. And while some budget carriers may target those travelers, there’s no guarantee that airlines will be willing to cut fares, especially when facing steep debt accrued during the pandemic and pressure from shareholders eager to see profits, said Henry Harteveldt, a travel industry analyst and the president of Atmosphere Research Group.
“Airline CEOs are not in a generous state of mind these days, nor are their CFOs, so I’m not expecting airlines to discount seats to the same extent that we may have otherwise seen,” he said. “I think that there’s a lot of pressure on airlines to keep their airfares as high they can.”
As of Monday, airlines had more than 2.1 million domestic flights scheduled from June to August, according to Cirium, an aviation data provider. That figure could change substantially in the intervening months but is currently 8% lower than the number of flights scheduled over the same months in 2019. Last summer’s scheduled flights were down 16% from the summer of 2019.