From inflation and rising oil prices to a shortage of aeroplanes and airline staff, the cost of flying has surged, leaving many would-be travellers surprised as they go to book holidays.
According to Hayley Berg, an economist at the air travel booking app Hopper, almost every region of the world is experiencing a price increase.
For example, fares from the United States to popular European destinations like Athens, Barcelona and Rome have spiked by over 40 per cent compared with 2022.
The average airfare for an international round-trip flight with a major commercial airline now hovers around US$1000 for the cheapest coach-class seats.
There are several reasons for the rise in airfares.
Inflation
One major factor contributing to the rising costs of flights is inflation.
As the prices of basic items continue to climb, airlines feel the pinch, from higher pilots’ salaries to increased costs for in-flight snacks.
In fact, airfares are rising at a faster rate than inflation, with the average airfare in the US surging by 28.5 per cent in 2022 compared with the previous year, while the Consumer Price Index, a common measure of inflation, rose by only 6.5 per cent for the same period.
Oil Prices
Another significant factor driving up airfares is the price of oil. Jet fuel, which is typically one of the biggest expenses for airlines after labour, has also risen significantly from pre-pandemic levels due to global events such as the war in Ukraine.
In March 2022, Kiwi travellers were warned about how this could impact airfares. Since then, the cost of oil has continued to rise.
The price of crude oil is projected to average US$84.84 per barrel in 2023, up from around US$65 in 2021.
Aircraft shortages
The aviation industry is also facing a shortage of aircraft.
During the pandemic, airlines retired older planes with the expectation of replacing them with more fuel-efficient models. However, delays in aircraft manufacturing and delivery by major manufacturers such as Boeing and Airbus, caused by ongoing supply chain issues, have resulted in a scarcity of new planes.
Crew Shortages
At the same time, airlines face a persistent staffing shortage, despite receiving billions of dollars in subsidies to retain employees during the pandemic.
This shortage of pilots and other airline staff has limited the airlines’ ability to scale up their operations and meet the increasing demand for air travel.
Will airfare prices fall?
While the supply side of the equation remains tight, the demand for travel is surging, with many airlines reporting record booking volumes since the beginning of the year.
The phenomenon of revenge travel and pent-up demand has resulted in a market where airlines can charge high prices as long as people are willing to pay them.
However, there may be some hope for relief in the future. A possible recession could dampen demand for air travel, which could lead to lower airfares.
Additionally, major aircraft manufacturers like Boeing have announced plans to speed up their aircraft deliveries, which could help alleviate the shortage of planes in the market and potentially bring down prices.
How to find cheap flights
In the meantime, travellers searching for ways to save on flights can consider booking with low-cost airlines, signing up for airline loyalty programmes to receive alerts about flash sales, or using fare comparison calendars to find the best prices.
Booking vacation packages that include airfare and hotel accommodations may also offer lower fares, as airlines often provide discounts for package deals.
