A Frontier Airlines plane passes a Spirit Airlines plane at the Indianapolis International Airport in Indianapolis, Indiana.
Luc Sharrett | Bloomberg | Getty Images
FORT WORTH, Texas — Airlines have a record 260 million seats to fill this quarter, and to do so, they’re offering fares that will cost you about the same as a pair of movie tickets.
Southwest Airlinesfor example, last month offered one-way fares of $29 for early morning or evening flights, an example of airline discounting for off-peak periods.
“I would characterize the amount of discounts or sales we’re doing today as a little bit more than normal,” Ryan Green, Southwest’s chief commercial officer, told reporters at the Skift Aviation Forum earlier this month. He said the industry’s increased capacity in recent months means there are more seats to fill, even though the carrier’s average fare has increased in recent months. quarter from a year ago.
Leisure travelers, meanwhile, have largely returned to more traditional booking models after years of pandemic fluctuations in demand, forcing airlines to look for ways to fill their planes outside of holidays or other popular travel periods.
“Typically, you see a gradual increase in price every seven days before a flight,” said Scott Keyes, founder of Scott’s Cheap Flights, a flight sales company recently renamed Going. But airlines are dropping their fares last minute or not raising them as much as usual, he said.
Airlines booked a record 259.8 million seats for domestic flights in the fourth quarter, up nearly 8% from last year, on 1.86 million flights, up 6 % compared to 2022, according to aviation data company Cirium.
Finding the right off-season balance is a challenge for airlines, which make the majority of their revenue in the second and third quarters, during the busy spring and summer seasons. Most major carriers reported record revenues and strong demand during these periods, with some executives reporting higher growth for international rather than domestic destinations.
United States inflation September readings show airfares fell more than 13% from a year earlier, while overall consumer prices rose.
JetBlue Airways said average rates fell more than 12% in the third quarter over the same period of 2022 to $201.73.
Economy carrier Spirit Airlines said fares fell nearly 28% from a year earlier, to $48.73, although non-ticket revenue, which includes additional fees such as seat selection fees and checked bags , rose 1% to $67.70.
The Miramar, Fla.-based airline that JetBlue is trying to buy warned of fare cuts before Thanksgiving and said, “Unfortunately, we have not seen the anticipated return to a normal demand environment and pricing for peak holiday periods.
Ultra-discounter companion Border Airlines said rates averaged just over $39 last quarter, down 32% from a year ago.
Declining pricing power outside of peak periods has forced carriers to rethink where they deploy their planes.
Sud-Ouest plans to slow down its growth next year to meet changing demand trends, although CEO Bob Jordan described demand during an earnings call late last month as “strong.”
“Capacity is the most valuable asset you have to generate revenue, and you need to deploy that capacity as efficiently as possible in the face of demand,” Jordan said at the Skift Aviation Forum.
The carrier plans to fly less on off-peak days, such as Tuesday, compared to periods of higher demand, a move that also prioritizes crew time so they are prepared to fly more when there is a lot crowded, Jordan said.
Frontier Airlines CEO Barry Biffle told CNBC that one thing the airline is changing is finding less crowded markets for its flights.
“We are focusing our growth away from saturated markets,” he said. “We won’t shrink in Orlando and Vegas, but we probably won’t expand it either.”
The shift in demand is accompanied by eye-catching double-digit prices.
But they usually disappear quickly and are almost certain to be unavailable during peak holiday periods, with demand expected to reach or break records.
Delta Airlines said it expects to carry between 6.2 million and 6.4 million passengers Nov. 17-28 during the Thanksgiving holiday, up from 5.7 million last year and 6.25 million in 2019. United Airlines said it expects to carry 5.9 million passengers from November 17 to 29, up 13% from last year and 5% more than in 2019. American airlines forecasts a record 7.8 million travelers Nov. 16-28, up from 7 million last year and surpassing 2019 by about 200,000 customers.
Southwest CEO Jordan said holiday bookings are ahead of last year’s pace.
Flight tracking agency Hopper said “bargain” domestic fares, which it defines as the bottom 10th percentile of available fares, average $248 for Thanksgiving, up from $271 last year and $276 in 2019.
Airlines are now considering their schedules for 2024 to try to make the best use of their planes as they face higher costs, such as fuel and labor. pinched margins.
“You see carriers offering rates that look a little bit like ours, and what you really have to think about is that this is not going to be permanent,” said Biffle, Frontier’s CEO, citing costs.
Carriers have become more sophisticated at responding to changing demand trends, meaning they can reduce flights or capacity during travel lulls.
Next year, rates are expected to stabilize, but it’s too early to say what promotional rates will be, said Henry Harteveldt, founder of travel industry consultancy Atmosphere Research Group.
“If inflation really continues as torrid as it has been, if we see a slowdown in hiring, airlines might feel the need to invest in more promotion,” he said. declared.
One of the advantages of full-service carriers is the variety of fares and products they can offer, from no-frills basic economy to Harteveldt first class. This means they could increase their inventory of cheaper products basic economy rates during periods of lower demand, or increase rates when demand is high to premium seats.
Airlines “have the most sophisticated cash registers in any industry,” he said.
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