Memorial Day weekend marks the start of the airline industry’s busy summer travel season and airfare expert Bob Harrell said fares are going up.
“Well, they’ve been going up fairly dramatically in the last six months at least,” he told Yahoo Finance.
Harrell is president of Harrell Associates, a firm that tracks and benchmarks ticket prices across the industry. In normal times, business fares are four to five times more expensive than leisure fares, according to Harrell, but right now, “business travel in today’s environment is nearly non existent. So the name of the game is leisure fares,” he said.
Harrell’s airline index tracks leisure fares across 300 domestic routes in the United States. He said the increase in fares began before Easter and continued through the end of April. “The leisure fares on a national basis went up by 7.7% which is a lot in a several week period.”
That uptick was captured in the April consumer price index (CPI), which showed inflation running up 4.2% driven by increases, “for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings,” according to the US Bureau of Labor Statistics.
‘Travel without quarantine’
According to the Transportation Security Administration (TSA), 1.7 million passengers moved through TSA check points on May 9, the largest number in more than a year. In 2019 that number was 2.4 million. Harrell said increased demand is putting pressure on airlines to charge more for tickets as passengers return. “Airfares will definitely be returning to closer to normal later this year,” he predicted.
“We believe the Biden administration needs to make a decision about international travel within the next week to 10 days,” Cowen Equity Research analyst Helane Becker wrote in a note to her clients May 11th.
The airlines want their lucrative transatlantic European routes reopened as Americans plan their summer travel. CEOs from major carriers in the US and UK sent a letter this week to airline regulators in both countries calling for a summit to restart air service between the two continents.
“Nobody wants to go to Europe to stay in their hotel room for a week or be under quarantine,” Harrell said.
Becker told her clients, “Even though we believe vaccinated people should be able to travel without quarantine, Europe remains mostly closed. Greece, Iceland and Croatia are open to US citizens. We thought the UK would open to US citizens on May 17, but it was not one of the countries on the UK’s ‘green’ list, which is disappointing.”
Higher jet fuel prices
Increasing prices for jet fuel are also adding pressure on airlines to raise prices. Becker said, “Our enthusiasm in the short term is tempered by higher jet fuel prices.”
Colonial Pipeline Co. reportedly paid hackers $5 million to reopen the pipeline which provides 45% of the East Coast’s fuel, which includes jet fuel.
Energy Word founder Dan Dicker doesn’t expect the pipeline shutdown to have a lasting impact on prices for gas or jet fuel. “There’s certain variants of these kinds of refined products that run through these pipelines. And this one, this particular one, the Colonial is really just for gasoline,” he told Yahoo Finance Live.
Delta Air Lines CEO Ed Bastian told NBC’s Today Show the airline is in close contact with Colonial. “Right now, we’re not having any impact at Delta. We have sufficient supply in our stations. This is the reason we carry extra supplies in the event of a short-term outage. They’re telling us that they expect the supplies to be back on hopefully by the end of the week and as long as those predictions come true hopefully we’ll be OK.”
Despite the mounting pressure on airlines to raise ticket prices, Harrell said there are still low airfares to be found. “Shop as early as you can and shop around. You can, if you know your destination, track fares to that destination until you see over time that you’ve got a low fare,” he advised.
Adam Shapiro is co-anchor of Yahoo Finance Live 3pm to 5pm. Follow him on Twitter @Ajshaps
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