Here comes even more expensive ticket prices for spring breakers and summer travelers.
“Ticket prices are strong now. Probably not really related to oil — demand is so strong, we have full planes. I think our fares are as good as they have been for us. We are talking about prices 4% or 5% higher than they were in 2019,” said Alaska Airlines CFO Shane Tackett on Yahoo Finance Live.
Domestic airlines are seen increasing fares by 7% on average each month until June, according to the latest Consumer Airline Index Report from Hopper. Round-trip airfare is seen reaching a peak of $315 on average, the report says.
The ticket price inflation reflects several factors.
First, jet fuel prices have gone through the roof as the West has slapped energy-rich Russia with sanctions for its war on Ukraine. Jet fuel prices are up about 38% since the end of February, according to the U.S. Energy Information Administration (EIA).
Meanwhile, airlines are seeing a crush of demand as the world recovers from the pandemic. In turn that has pushed up costs for airlines from everything to labor overtime to the aforementioned fuel.
“The biggest surprise to us in recent airline commentary was that demand was so strong that they feel confident in the ability to pass through the majority of the fuel increases. This is way ahead of how airlines have been able to price historically, and we think near term labor issues and pilot pipeline helps keep a lid on capacity. With the way demand is trending, demand could likely exceed supply for the first time in the pandemic, which is driving pricing power,” said Bank of America analysts in a new research note.
Bank of America thinks this level of pricing power is bullish for airline stocks. Several names the investment bank likes are Delta Air Lines, JetBlue and Spirit Airlines.
For its part, Alaska’s Tackett sees demand returning strongly this summer.
“We expect to be at our pre-COVID size in May or June of this year. We are excited to be able to finally get back to that,” Tackett said.