Flights have become more expensive since the start of the war in Iran. But by how much?
Data from flight search engine Skiplagged shows that ticket prices for popular domestic routes rose 35 percent this summer compared to last year, reversing three years of falling prices. Fares on popular international routes have increased by around 15 percent.
Itineraries booked in May for June and early July are often among the most expensive fares of the year, behind those during the holiday season. This summer, domestic passenger prices are the highest since 2022.
At first glance, the slightest increase in international fares may be surprising: flights abroad are generally longer and require more jet fuel, the price of which has almost doubled since the start of the war.
Airline analysts say prices on international routes may have risen less due to lower demand for travel to the United States and the fact that it is harder for airlines to change routes and reduce flights. In contrast, airlines can more easily reduce capacity on domestic flights when demand is low, increasing scarcity and leaving prices high.
How big your travel budget is this summer depends on where you’re going. In the data sample provided by Skiplagged, more than half of all domestic flights saw an increase of at least 25 percent.
Forecasts had warned of widespread jet fuel shortages in Europe, as well as major flight cancellations and price hikes. “For the most part, a lot of these efforts have not been successful,” said Christopher Anderson, a professor at Cornell Business School who studies airline pricing. “Airlines have done a good job changing their routes, limiting some of that capacity.”
Airlines are also hedging their jet fuel expenses by increasingly passing on costs to customers with higher airfares and baggage fees.
The situation was different when oil prices soared in 2022 after Russia’s invasion of Ukraine, with price increases more closely linked to jet fuel costs.
Analysts say prices rose further in 2022 due to high pent-up demand and personal savings due to the pandemic, leading many people to splurge on “revenge trips.”
It has also been difficult for airlines to know when the Strait of Hormuz would reopen and how long high jet fuel prices would last.
“There is a huge lag between when an airline incurs the cost of fuel and when it sells seats,” Mr. Anderson said.
But this year, so far, customers are still flying. Last month, Southwest Airlines CEO Bob Jordan said the company had pushed through seven fare increases since February but had seen “no decline in demand.”
That could be partly due to the powerful lure of summer travel, said Conor Cunningham, an airline and travel analyst at investment firm Melius Research.
“Summer tends to find a way,” he said, adding that those with money to travel always book flights. Although most flight cost indices track economy class prices, Mr. Cunningham and others have noted that prices for premium seats have risen even faster.
Aktarer Zaman, founder of Skiplagged, said his site attracted the most visitors when prices were high. People are more likely to set price alerts during times of high prices and wait to book until they receive a price drop alert, he added.
These alerts may not come anytime soon.
With a truce in Iran, fuel prices are down about 35 percent from the April peak. But they remain higher than they were at the start of the year, and it remains an open question whether rates will keep up with fuel prices. Airlines are reluctant to lower prices unless forced to do so by competition, according to Robert Mann, an industry consultant and former airline executive. The demise of budget airline Spirit means prices could fall even more slowly, he added.
Other analysts noted that airfares were not keeping up with overall inflation and that the price increases were long overdue.
“There is a legitimate argument that this is now the new standard in pricing,” Cunningham said. “The question is when people react. »
