Speaking on US television network Newsmax, Tim Hentschel explained that the traditional assumption of airlines slashing prices shortly before departure to sell empty seats no longer reflects how carriers manage capacity.
“Airlines are trying to profit maximize,” Hentschel said. “ Instead, carriers can control supply and reduce the number of flights if demand does not support the fares they want.”
His comments about the cost of holiday travel for US consumers were confirmed by Mark Malik, chief investment officer at Siebert Financial.
Hentschel said airlines are looking to maintain fares around 30% higher year over year to protect themselves against rising fuel costs. If travelers do not buy all the available seats, airlines can con consequently reduce capacity rather than broadly discounting tickets. “They can always get rid of supply by cutting back a few planes,” he said.
That means travelers hoping to pick up a cheap Thanksgiving or Christmas ticket in the final days before departure could be disappointed.
Hotel rates offer some relief
However, there is a silver lining for travelers looking at the total cost of a holiday trip. Tim Hentschel highlighted that consumers could find a more favorable picture once accommodation is included.
Hotels are facing a different market, he said, with rates beginning to fall as the economy has softened during the second half of the year.
The decline could offset some of the increase in airfare, particularly for travelers staying several nights.
Hentschel pointed to the dramatic increase in hotel costs over the past five years. Average three-star hotel rates in major cities have risen from around $150 per night to more than $250, he said, partly reflecting higher rents and the broader increase in the cost of accommodation.
As an example, he said a $20 reduction in the nightly hotel rate over a five-night stay would produce $100 in savings, potentially offsetting a $100 increase in airfare.
In some cases, he suggested, the overall package could actually become cheaper even while the flight itself costs more.
Fuel remains key to airfare outlook
Malik said jet fuel remains a major factor in determining when airfares could eventually come down.
Even if geopolitical tensions affecting fuel markets were to ease immediately, he said it could take until the end of the year or even longer for lower fuel costs to work their way through airline pricing.
Airlines also tend to react slowly to falling fuel prices, Malik said, describing the pattern as “rockets on the way up and feathers on the way down.”
In conclusion, a higher flight price does not necessarily mean a more expensive vacation if accommodation costs are moving in the opposite direction. Booking on Hotelplanner can definitely help balancing skyrocketing flight.
