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| 1 minute read

Airfares - Time to recalibrate your expectations?

A combination of increased passenger demand and a cautious approach, on the part of most airlines, to rebuilding capacity following the Covid-19 pandemic has resulted in surging air fares and bumper profits for many airlines. U.S. inflation data published in October indicates that average airfares have increased by 43% over the last year. 

After the dire consequences of the pandemic, who would begrudge any airline for wanting to cash in? However, with inflation, globally, running rampant, it would seem almost inevitable that airfares will need to "normalize" in order to avoid passenger demand falling off a cliff.  

Airlines are clearly expecting a strong festive season, but what will things look like in the new year? As inflationary pressures start to bite, people will find it harder to justify expenditure on luxuries, such as air travel.

Airlines will therefore have the difficult task of managing capacity in order to ensure that airfares don't reach a level that will cause a material fall in customer demand. That balancing act will also need to factor in the surging costs that their businesses are currently suffering (in terms of aviation fuel, interest rates and the supply chain generally).

It will be interesting to see what the new normal will look like. It's quite clear, however, that truly low cost air fares (of the type offered before the pandemic) have been consigned to the history books (for the foreseeable future, at any rate). After many years of access to cheap air travel, we will all need to re-calibrate our expectations!

limited capacity is keeping airfares high and the question is whether or when that impacts demand

Tags

transportation, aviation

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