A Frontier Airlines airplane taxis past a Spirit Airlines aircraft at Indianapolis International Airport in Indianapolis, Indiana.
Luke Sharrett | Bloomberg | Getty Images
FORT WORTH, Texas — Airlines have a record 260 million seats to fill this quarter, and to do it, they’re offering fares that can run you concerning the same as a pair of movie tickets.
Southwest Airlines, for instance, last month offered one-way fares of $29 for flights early within the morning or at night, only one example of airline discounting for off-peak periods.
“I’d characterize the quantity of discounting or sales that we’re doing today as a bit greater than normal,” Ryan Green, Southwest’s chief industrial officer, told reporters on the Skift Aviation Forum earlier this month. He said the industry’s increased capability in recent months means there are more seats to fill, regardless that the carrier’s average fare was up within the last quarter from a 12 months ago.
Leisure travelers, meanwhile, have largely returned to more traditional booking patterns after years of pandemic swings in demand, leaving airlines on the lookout for ways to fill planes outside of holidays or other popular travel periods.
“Typically, you see a step increase in price at each seven-day mark before a flight,” said Scott Keyes, founding father of Scott’s Low cost Flights, a flight-deal company that recently rebranded as Going. But airlines are either dropping last-minute fares or not raising them as much as usual, he said.
Airlines have scheduled a record 259.8 million seats for domestic flights within the fourth quarter, up nearly 8% from last 12 months, on 1.86 million flights, up 6% from 2022, based on aviation-data firm Cirium.
Getting the balance right within the off-season is a challenge for airlines, which make nearly all of their revenue within the second and third quarters throughout the busy spring and summer seasons. Most major carriers reported record revenue and powerful demand during those periods, with some executives reporting higher growth for international destinations over domestic ones.
Falling fares
JetBlue Airways said average fares dropped greater than 12% within the third quarter throughout the same period of 2022 to $201.73.
Budget carrier Spirit Airlines said fares dropped nearly 28% from a 12 months earlier to $48.73, though non-ticket revenue, which incorporates add-ons equivalent to seat selection fees and checked bags, rose 1% to $67.70.
The Miramar, Florida-based airline, which JetBlue is attempting to buy, warned about fare discounting before Thanksgiving and said, “unfortunately, we’ve got not seen the anticipated return to a standard demand and pricing environment for the height holiday periods.”
Fellow ultra-discounter Frontier Airlines said fares averaged a bit greater than $39 within the last quarter, down 32% from a 12 months ago.
All three carriers forecast losses for the last three months of the 12 months.
Rethinking capability
Declining pricing power within the off-peak periods has forced carriers to rethink where they’re deploying their planes.
Southwest plans to slow its growth next 12 months to deal with the shifting demand patterns, though CEO Bob Jordan described demand on an earnings call late last month as “strong.”
“Capability is probably the most precious commodity you could have to supply revenue, and also you got to deploy that capability as efficiently as possible against demand,” Jordan said throughout the Skift Aviation Forum.
The carrier is planning to fly less on nonpeak days, like Tuesdays, compared with higher-demand periods, a measure that also prioritizes crews’ time in order that they are ready fly more when it’s busy, 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’re concentrating our growth away from the saturated markets,” he said. “We is not going to shrink in Orlando and Vegas, but we’re probably not going to grow it either.”
Holiday demand remains to be strong
With shifting demand comes those eye-catching, double-digit fares.
But they’re normally gone quickly and are nearly guaranteed to be unavailable for peak holiday periods, with demand expected to hit or break records.
Delta Air Lines said it expects to hold between 6.2 million and 6.4 million passengers from Nov. 17 to Nov. 28 throughout the Thanksgiving period, compared with 5.7 million last 12 months and 6.25 million in 2019. United Airlines said it expects to fly 5.9 million passengers from Nov. 17 to Nov. 29, up 13% from last 12 months and 5% greater than 2019. American Airlines forecast a record 7.8 million travelers from Nov. 16 to Nov. 28, up from 7 million last 12 months and beating out 2019 by around 200,000 customers.
Southwest CEO Jordan said year-end holiday bookings are running ahead of last 12 months’s pace.
Flight tracker Hopper said “good deal” domestic fares, which it defines as the underside tenth percentile of obtainable fares, are averaging $248 for Thanksgiving, down from $271 last 12 months and $276 in 2019.
Could it last?
Airlines at the moment are poring over their schedules for 2024 to attempt to best use their aircraft while they face higher costs equivalent to fuel and labor which have pinched margins.
“You are seeing carriers put out fares that look form of like our fares, and what you must really take into consideration is that that is not going to be everlasting,” Frontier’s CEO Biffle said, citing costs.
Carriers have gotten more sophisticated about addressing shifting demand patterns, meaning they’ll cut flights or capability during travel lulls.
Next 12 months, fares are prone to stabilize, nevertheless it’s too early to inform what promotional fares will probably be, said Henry Harteveldt, founding father of travel industry consulting firm Atmosphere Research Group.
“If inflation really continues on the torrid place it has been, if we see hiring soften, airlines may feel a necessity to take a position in deeper promotion,” he said.
One advantage for full-service carriers is the range of fares and products they’ll offer, from no-frills basic economy to top quality, Harteveldt. Which means they might increase their inventory of cheaper basic economy fares during weaker demand periods, or raise fares when demand is high for premium seats.
Airlines “have probably the most sophisticated money registers of any industry,” he said.
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