Whether it’s due to inflation, increased demand, or airline complications, such as staff shortages and grounded planes, travelers have been dealing with increased travel expenses for quite a while.
“I've been joking with friends and family that $400 is the new $250 for an airfare,” Morningstar industrials equity analyst Nicolas Owens quipped on the Morning Brief.
While many travelers may share this sentiment, prices have actually leveled out from their high point in May and June of 2022, when the average monthly airfare departing from US cities was shy of $320. Airline ticket prices have now settled around an average of $270, according to the US Bureau of Labor Statistics.
The Points Guy founder Brian Kelly suggested that the extra costs of travel may actually be coming from another source entirely.
“I think stats like that are very anecdotal,” Kelly said in response to Owens. “When you look at the large data sets, you're not seeing mega increases [on flights].”
Kelly said that where he’s seeing a price boom is at luxury hotels.
“$1,000 used to get you the top-tier Four Seasons in Italy," Kelly said. "Now that's $2,000 and up at fancy hotels, and it's even creeping up into the $3,000 a night, which I think is just absolutely crazy. It can be cheaper to rent a yacht than stay in luxury hotels these days.”
Kelly said he expects airfare price trends this year to remain close to where they were last year.
“What I'm noticing in June and July, I think due to the Olympics, especially, airfares are much higher,” Kelly said. “August is normally the more expensive month. But this year, I'm seeing better deals. New York to parts of Italy for $4,000 in first class on British Airways, I was finding yesterday. Last summer, we saw business class $5,000, $6,000, $7,000 fares across the board. So while I think that airfare this summer is going to be about the same as last year, there are still deals out there.”
To snag those deals, Kelly recommended that travelers explore cost-saving tactics such as credit card rewards, using the Google Flights Explore tab, and checking for last-minute deals on flights with open seats.
Read more: Best travel credit cards for April 2024
What airline earnings can tell us
As Americans gear up for summer travel, the airline industry is dealing with a series of challenges that could impact future performance — and potentially airline ticket prices.
Coming into earnings season, there were many questions about how Q1 would look for airlines after Boeing’s (BA) mishaps, including the mid-flight blowout on an Alaska Airlines (ALK) 737 Max 9 jet in January, raised concerns around whether the company's planes are airworthy. Senators on both sides of the aisle are now asking the Justice Department to investigate the company.
Despite some uncertainty, the airlines that use their planes appear to be coming out of Q1 on stable ground.
United Airlines (UAL), for example, managed to beat earnings estimates despite losing $200 million in profits due to the grounding of Boeing planes. United stock reached a 2024 high of nearly $52 after reporting its Q1 results on Wednesday. The stock is up over 24% year to date.
"In a way, you could say that the damage here was pretty limited," Owens said. "They're saying it was a $200 million hit, which was the difference between them making money or losing money. To me, that just goes to show how narrow the margins in airlines really are."
Alaska Air Group also reported a smaller loss than expected in Q1, according to Reuters. Alaska expects to find more stability later this year, as business travel has started to pick back up — a refrain of "healthy" demand echoed by Delta CEO Ed Bastian.
Against this backdrop, Owens went on to take a more long-term view of the airline industry. He pointed out that United managed to book record revenue on capacity that's below 2019 levels through higher pricing and more premium offerings.
"They are benefiting from a common set of tailwinds right now," Owens said. "So even though it's frustrating that they can't get their hands on the planes that they ordered, and they maybe couldn't hire as many pilots as they wanted to ... what that is doing is actually putting a crimp on capacity expansion for the industry, which means they get to charge more for the same seat."
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