This Major Airline Is Warning Passengers About Serious Price Hikes
The CEO says customers should expect higher airfare costs in the near future.
For the better part of 2020, most of us were stuck in our homes, unable to travel for fear of possible exposure to the coronavirus. But while the COVID pandemic is far from over, vaccinations and ongoing mask requirements on flights have made air travel much less of a risk this year. Experts from Hopper, a research company that analyzes flight prices, estimate that around 1.9 million people will travel during the Thanksgiving holiday this year and 2 million during Christmas, which would be double the number of people who traveled during those same times last year. Unfortunately, holiday travelers may get hit with significantly higher ticket prices. Read on to find out which major U.S. airline is warning customers about rising ticket prices for flights.
United Airlines' CEO warned customers that ticket prices will increase.
Amid the ongoing pandemic, airline passengers have been experiencing lower airfare costs. But during an Oct. 28 interview on CNBC's Squawk on the Street, Scott Kirby, the chief executive officer for United Airlines, said that customers should expect ticket prices to increase soon. "Airfares are going to come back from the really, really low levels they got to during the pandemic," Kirby warned, noting that demand for flights is also increasing.
According to Kirby, increased demand plays a part in the rising costs. "Airplanes are going to be full [during the holidays]. The demand for the holidays is really robust and strong," he added.
Higher jet fuel costs are having a large impact on ticket prices.
According to CNBC, United Airlines is forecasting average fuel costs for the fourth quarter, which occurs during the holiday travel boom, to increase to $2.39 a gallon. This is a significant spike compared to the $2.14 per gallon it paid in the third quarter and the average of $2.02 per gallon it paid in the fourth quarter of 2019. Data from S&P Global Platts, a research company reporting on benchmark price assessments, reported that U.S. jet fuel on Oct. 19 was already $2.3282, per CNBC. This is a 115 percent increase from just one year ago.
Higher demand usually drives jet fuel prices up, according to Kirby, and unfortunately, this is set to produce a snowball effect. "Ultimately, higher jet-fuel prices lead to higher ticket prices," he explained.
Other major airlines have warned about rising fuel prices.
While no other airlines have directly come out to warn customers about rising ticket prices, they are feeling the effects of increased jet fuel costs. Before reporting its steepest drop in profits in a year, Delta Air Lines CEO Ed Bastain warned investors during an earnings call that higher jet fuel costs were likely to affect revenue.
"That's going to be a limiter on our ability to post a profit in the quarter. At these current fuel levels, it looks like we'll have a modest loss," Bastain said, per Bloomberg. And on Oct. 21, both American Airlines and Southwest Airlines warned that rising fuel prices were also likely to hurt their earnings in the next quarter, as reported by Reuters.
Federal officials says they're already seeing an increase in airfare.
On Oct. 19, the U.S. Department of Transportation (DOT) released a report showing that the average round-trip airfare for domestic flights had increased in the second quarter of 2021. Prices increased to $300 during this quarter, which is a 12.6 percent increase from the first quarter average of $266. The airfare is also up 18.2 percent from the lowest average fare of $254 during the third quarter of 2020. But prices are still lower compared to years before the pandemic, as the second quarter prices of 2021 are down 24.7 percent from $398, which was the cost during the second quarter of 2016.
"The second quarter 2021 fare increased as passenger travel increased significantly," the DOT said. "Air fares increased as passenger demand increased. U.S. airlines reported 62.5 million originating passengers in the second quarter 2021, up from 33.4 million passengers in [quarter one], and up from 11.5 million passengers a year earlier."