Travelers at New York's LaGuardia Airport on June 30, 2022.
Leslie Joseph | CNBC
Airline tickets fell 6.4% in January from a year earlier, the Labor Department said Tuesday in its monthly consumer price index report. It may not last too long.
January is typically a slower month for travel as customers make fewer trips after the New Year holidays. Domestic travel typically increases during school holidays and spring break.
The drop comes even though carriers face capacity constraints this year, in part due to an engine recall by Pratt and Whitney, congested airspace and delays in aircraft deliveries. Meanwhile, airline executives have forecast strong demand this year, including in the domestic market, which has faced increased competition from international destinations that opened in the wake of the pandemic. Those trends could help raise rates.
“The capacity decline is related to artificial constraints due to aircraft delivery delays and GTF engine issues,” TD Cowen airline analyst Helane Becker said in a note on Friday. “These are not going away anytime soon. With demand remaining above year-ago levels and above 2019 levels, we expect an improvement in prices.”
Airlines included South west and Alaska have moderated their capacity growth forecasts for the year. In 2023, airlines were forced to discount flights, especially in slower periods, after the industry added capacity.
Flight tracker Hopper said it expects “good deal” domestic fares, which it defines as the bottom 10th percentile of available fares, to average $276 in February. The company expects the average to rise to $302 in May, an increase of more than 9% from its February forecast.
Delta CEO Ed Bastian said aircraft repair and the parts supply chain are the most important areas of the business that have not returned to pre-pandemic levels.
“All of our industry suppliers lost a tremendous amount of experience due to the pandemic, and it's taking time to get it back,” Bastian said on a Jan. 12 earnings conference call.
The grounding last month of boeing 737 Max 9 after fuselage panel explosion in mid-flight caused capacity limitations for Alaska and Unitedthe only two American operators of the plane, although the planes returned to service in late January.
The Federal Aviation Administration has said it will stop Boeing from increasing production of the Max while it reviews the planemaker's manufacturing lines.
Alaska said it expected capacity to grow 3% to 5% this year when it released its quarterly earnings last month but, “given the grounding and the potential for future delivery delays, the company expects capacity growth to be at or below the lower end”. of this rank.”
united airlines CEO Scott Kirby said on a Jan. 23 earnings conference call that he expects a challenging environment in 2024 as the industry faces hiring constraints, maintenance catch-ups and supply chain issues.
“It turned out to be even more challenging than we thought… Those operating environment challenges directly led to industry capacity plans, including ours, going down 3 points on average as operators adapted to the new operating environment “Kirby said.
Air traffic demand has continued to recover from its pandemic lows. Total global traffic reached 94% of its pre-pandemic level in 2023, according to the International Air Transport Association.
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