This time last year, the travel world was entering hibernation. Airlines were grounding planes and parking them in the desert, Americans canceled trips, and the outlook for travel was bleak. With travel demand at rock bottom, airlines slashed fares to record lows throughout much of the pandemic.
But that’s all changing now: Travel is coming back – and fast. More than 1 million Americans are flying every day as the summer travel season approaches, many more are searching for flights again, and countries around the world are reopening their borders. With any luck, the pandemic is fading.
So what happens to those bargain flight deals like $50 domestic fares or $200 roundtrip fares to Hawaii or flights to Japan for less than $300? Are airlines raising prices as Americans come out of the woodwork to return to the skies?
Maybe. But not in the way that you think. And the unbelievably cheap flights are still out there.
Supply and Demand
One thing is clear: Demand for travel is coming back.
As with all things, one of the biggest factors behind flight prices is the simple law of supply and demand. Demand disappeared as the pandemic first struck last year, forcing airlines to cut the supply of flights until it returned. Airlines dropped routes and cut frequencies, running just 20% of their normal operations – or less.
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But even with travel on the upswing, things aren’t quite back to normal yet. Even with a surge this spring and a big summer travel season on the horizon, it will still take years for travel to return to its pre-pandemic levels. Business travel has been critical for airlines to churn out record profits, but it may never fully return.
Critically, airlines still have some planes in storage that they can bring back as we continue on the path back to normal. They should be able to slowly ramp back up the supply of flights as travel continues to recover.
But one thing is clear: Airfare is on the way up for this summer, especially domestically. Fares that were once under $100 (or less) are on the rise as Americans who were stuck at home for the last year get back out into the world.
Beyond that? There’s no clear trendline. Cheap fares are still prevalent for this fall, winter, and even out into 2022. Despite all the talk about flight prices skyrocketing, we’re still finding some of the cheapest flights for future travel – in some cases, cheaper than anything we’d seen throughout the worst of the pandemic.
In short: Cheap flight deals aren’t going anywhere. When the coronavirus pandemic first upended travel, we saw airlines slash fares to get more travelers on planes. They’re still doing so today as a way to scrape up whatever ticket sales they can find.
And it’s safe to assume they’ll do the same once it’s over. That means we think you can count on some astonishing sales in the future.
Competition Will Drive Flight Prices (Likely Down)
If supply and demand is the principle behind airfare, competition between airlines is the gamechanger.
The airline industry is cutthroat. Every year, we see new players enter and exit the game. Even in the midst of the worst year for the airline industry, not one but two new U.S. carriers start up recently: Avelo Airlines and Breeze Airways.
And in the meantime, airlines are constantly targeting their competitors, offering dirt-cheap prices to undercut each other in hopes of winning more customers. The connection between competition and price is undeniable. And we’ve seen that competition take off lately.
Take, for example, flights to Alaska. Americans are poised to head for Alaska’s great outdoors in record numbers this summer, and airlines are fighting to get travelers there. Alaska Airlines and Delta, in particular, have been going back and forth for months with dirt-cheap fares and even a Delta SkyMiles flash sale with roundtrip flights to Alaska from just 5,000 SkyMiles.
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Critically, the major carriers like Delta, American, and United aren’t just fighting with each other anymore. With business travel out and leisure travel roaring, even the biggest airlines have to compete with low-cost budget carriers like Spirit, Frontier, and Sun Country. That’s a recipe for some low fares for the foreseeable future.
Unfortunately, it’s not all good news – especially when it comes to international travel. Many of the budget airlines flying to Europe have disappeared.
WOW Air came out of the gates hot with some of the lowest pricing to fly between the U.S. and Iceland, with flights under $50 each way. Norwegian Air and TAP Air Portugal have made their name with low fares across the Atlantic but continue to struggle. And the list goes on.
WOW Air collapsed a year ago. Primera Air went kaput in 2018. And now, Norwegian has stopped flying between the U.S. and Europe altogether.
These budget carriers have driven flight prices to Europe down to record lows in recent years – as low as $300 round-trip (or even less.) Sure, you can snag a cheap flight on one of these barebones airlines. But they’ve also forced major airlines like Delta, American, United, and their international partners to compete on price, too. And that’s a win for consumers. Without that competition from the likes of Norwegian, the pressure on those bigger carriers is gone.
Airlines Costs Are a Mixed Bag
Running an airline is an expensive business, and you can sometimes see that in your ticket prices. Two costs stick out more than others: Oil and employee salaries. And on that front, it’s a mixed bag.
Here’s the good news: Thanks to the last financial rescue package from Congress, U.S. airlines’ salaries are completely covered through the end of September 2021. That should give airlines a lot of extra breathing room to keep fares lower throughout the summer and into the fall as travel continues to recover.
Jet fuel, on the other hand, is one of the biggest costs for each and every airline. It’s another huge factor in the price of travel. And while it dropped like a rock in 2020, it has slowly climbed back to pretty normal prices – if not a bit higher.
Watch the price of oil in the coming weeks and months. If it continues to climb, that could cause some trouble for flight prices. But if these prices hold or dip again, it’s a potential catalyst that will pull down airfare with it.
Predicting airfare is more art than science. It can be unpredictable, given the puzzling sales we see from airlines day after day, year after year. Cash grabs, mistake fares, flash sales, and fare wars can spring up at any moment.
There are still bargains to be had now for future travel. Despite a recent uptick in summer flight prices, we’re still bullish on the future of cheap flights as we all return to the skies.
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