High travel costs locked in as air travel heads back to pre-pandemic levels

Latest figures show air traffic is nearing pre-pandemic levels as a forecast for next year shows high costs are baked in, although price rises will slow.

International Air Transport Association figures show that as measured in revenue passenger kilometres, or RPKs, traffic for August rose 28.4 per cent compared with the same month last year.

Globally, traffic is now at 95.7 per cent of pre-Covid levels.

Domestic traffic for August rose 25.4 per cent versus August 2022 and was 9.2 per cent above the August 2019 results. This is largely driven by Chinese domestic demand.

International traffic climbed 30.4 per cent compared with the same month a year ago. All markets saw double-digit percentage gains year-on-year.

International RPKs reached 88.5 per cent of August 2019 levels.

“Demand for air travel performed well in August. For the year to date, international traffic has increased by 50 per cent versus last year and ticket sales data show international bookings strengthening for travel in the last part of the year,” said Willie Walsh, IATA’s director general.

The figures come as the Global Business Travel Forecast by CWT shows travel and events costs are set to climb higher through the remainder of 2023 and into 2024, albeit at a much more moderate pace than the exceptionally steep increases seen in 2022.

Rising fuel prices, labour shortages, and supply chain challenges, coupled with red-hot demand, caused travel prices to skyrocket in 2022.

Lingering economic uncertainty and a gradual easing of supply-side constraints are expected to result in more subdued price increases over the next 12 to 18 months, according to the report, which uses anonymised data generated by CWT and the Global Business Travel Association (GBTA), with publicly available industry information, and econometric and statistical modelling developed by the Avrio Institute.

Average airfares soared in 2022 by 72 per cent to $US749 ($1266) from 2021 when air travel was at pandemic lows, are predicted to edge up this year by 2.3 per cent and a further 1.8 per cent rise is forecast for 2024.

Average hotel rates went up 29.8 per cent to $US161, forecast to increase a further 4.3 per cent this year and another 3.6 per cent next year.

Average car rental costs went up 9.8 per cent to US$45, and are forecast to go up 6.7 per cent this year and another 3 per cent in 2024.

Last year’s average air ticket prices rose highest in the Asia-Pacific - climbing 148.7 per cent year on year $US567, despite a lack of international travel demand from China.

Average airfares rose 75.3 per cent for Australia and 79.3 per cent for Japan in 2022, with a sharp rise in the share of long-haul tickets.

As airlines in the region – particularly the major carriers from China – continue to add more international route capacity, the increased supply should help ease price pressures in the region, with average ticked prices forecast to rise 4.8 per cent in 2023 and 2.7 per cent in 2024, the study says.

The figures in the report are based on data from more than 70 million ticketed flights, over 125 million hotel room night bookings and more than 30 million car hires covering data from 2018 to now.

“A potent combination of demand and supply-side pressures propelled travel prices higher than expected last year,” said Patrick Andersen, CWT’s chief executive.

• In New Zealand the number of international visitors totalled 376,000 in August 2023, up 94 per cent from August 2022. The MBIE figures show the international visitor volume is now 97 per cent of August 2019 (pre-Covid) levels. Compared with August 2019, Tairawhiti showed the strongest proportional increase (up 13 per cent) in international visitors, while Coromandel (down 57 per cent) and Fiordland (down 46 per cent) showed the largest proportional decreases.

Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.