May 17, 2022

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Airfares soar as Americans shrug off Covid and inflation to get away

2 min read

US airlines are poised to raise ticket prices further as Americans shrug off the fastest rise in domestic airfares for decades in their determination to travel.

Airfares rose by 18.6 per cent in April from the previous month, the largest one-month increase in the history of the Consumer Price Index, according to the US Bureau of Labor Statistics. They were one of the largest contributors to the 8.3 per cent rise in the CPI last month.

On a yearly basis, the airline fares index was up 33.3 per cent, the largest one-year increase since 1980, though prices were still depressed at the same point in 2021 owing to the Covid-19 pandemic.

“We hope customers will tolerate [increasing prices] for a long time,” said Jeffrey Goh, chief executive of Star Alliance, the global airline consortium that includes United Airlines and Lufthansa. But “the industry is not deaf and blind to know that cost of living and rising inflation [are] a risk in terms of the industry recovery”.

Demand is outstripping the supply of seats, allowing carriers to pass high fuel and labour costs on to customers. Travel spending is increasing across the board with the fastest acceleration in airfares, so booking momentum should continue, said Michelle Meyer, chief US economist at the Mastercard Economics Institute.

Strong wage growth and swelled savings mean consumers “may be able to tolerate price increases for longer, particularly for a type of spend that they are prioritising”, she added. There is also no sign that the current surge in Covid-19 rates has slowed spending on airfares as it had in previous waves.

Amid robust, pent-up travel demand, US airlines have remained bullish about summer travel and their overall recovery, despite the inflationary pressures on consumers.

“Demand is as strong as we’ve ever seen it,” American Airlines chief executive Robert Isom said during an April earnings call. American, United, and Delta Air Lines, the…

2022-05-14 14:04:08

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