As the world starts to return to ‘normal’ with Covid restrictions easing, many of us have started travelling again.
With summer holiday season in full swing, and holiday-starved humans desperately looking for a sun-soaked getaway after a lockdown-heavy two years, flights are filling up.
However, if you’ve looked at Skyscanner lately, you’ll no doubt have balked at the prices, with tickets on average 25-30% more expensive than before the pandemic (and some routes even higher than that).
Why is this? We spoke to industry experts to suss out what’s going on, and how long it’s going to last.
Demand is high
Flights are usually more expensive during the school holiday season anyway, but demand is currently higher than usual, with more people looking to fly after two years of restrictions.
‘Demand is stronger than I think anyone would have anticipated, and certainly some airports,’ explains John Grant, aviation specialist and partner at Midas Aviation.
‘The strong demand coupled with around 15% less capacity than in 2019 (due to airlines grounding part of their fleet) means flights have been very busy.
‘In recent weeks airlines have had to adjust their planned capacity as airports and airlines have been unable to resource up to their peak requirements.
‘That means there are fewer seats to sell, so the normal supply and demand principles apply.’
Airline operating costs have increased dramatically
If you own a vehicle, you’ll definitely have noticed your bank card getting a battering at the pumps, thanks to increased fuel costs – in June, the cost of filling up a family car passed £100 for the first time ever.
There are a number of reasons why fuel costs so much more now, including higher demand following Covid lockdowns, Russia’s war on Ukraine, and a weak British pound (crude oil is paid for in US dollars).
If you think filling a car is expensive, imagine filling up a plane.
‘The price of jet fuel is a major factor in ticket prices,’ explains Becca Rowland, industry expert and partner at Midas Aviation.
‘Fuel accounts for a large proportion of airline costs, and it’s been high for a while now. Some airlines impose fuel surcharges, but not all can or do, so many are increasing the base fares.’
Unfortunately, it’s not just the price of fuel that’s affecting ticket prices.
‘Some airports – such as London Heathrow – have increased their costs way above any inflationary rate,’ adds John.
‘Plus, Eurocontro (the supplier of air navigation services) has almost doubled its charges. So, airlines are trying to be profitable, but it isn’t easy.’
The loss of business travel
Corporate travellers used to account for 12% of all passengers, yet made up to 75% of profits on some flights, according to pWc. This meant those champagne-swilling business class fliers were essentially subsidising us norms in economy.
However, with corporate travel ground to a halt during the pandemic, that has all changed.
‘For the legacy airlines in particular, business travel used to contribute a disproportionate amount of revenue,’ explains Becca.
‘While some business travel is back, just how much will be permanently lost is a hotly contested subject. With more people working from home all around the world, and many comfortable with meeting on Zoom, almost certainly a part of that market will not come back.
‘If business travellers were partially subsidising leisure travellers in the past and that subsidy is no longer available, fares need to be higher.’
Airlines are trying to recover loss of profit from the pandemic
With most of us stuck on our home turf for the best part of two years, airlines suffered a serious hit.
The global airline industry’s 2020-2022 losses are expected to reach $201 billion, according to the International Air Transport Association (IATA). Despite global revenue growing 27% from 2020 to 2021, international passenger demand was 75% below 2019 levels.
‘Many airlines are still paying back loans to cover their losses,’ explains Becca.
‘This means they’re not in a position to take chances with the routes they operate. Every route now has to pay its way, so airlines would rather grow capacity more slowly and allow supply/demand to keep fares higher, as they need to replenish their cash.’
How long will higher ticket prices continue?
With new variants rearing their ugly little heads, it’s hard to predict how long we’ll be faced with crippling flight costs.
‘I think fares will be high as long as airlines are facing high fuel costs and the market hasn’t returned to “normal”,’ advises Becca.
‘Demand has been strong but it’s not clear what will happen through the winter months, especially if another round of Covid diminishes demand for air travel, or new travel restrictions are imposed (though that seems less likely now).
‘I’d give it until next summer to see if fares look a bit more “normal”.’
Yikes.
How to find the cheapest fare
Be flexible with plans
‘Being flexible on holiday destinations and travel dates can make a significant difference for your travel budget,’ says Evan Day, UK country manager for travel search engine Kayak.
‘For instance, we’ve found holding out until September for your summer holiday – instead of the peak periods in July and August – can save hundreds on flight prices.’
Don’t take the easiest option
‘If flying long-haul open yourself up to longer connection times or stopovers,’ advises Yvonne Hobden, head of marketing at Flight Centre.
‘This is where we’re seeing savings.’
Wait for sales
‘It’s also worth watching out for key sale periods that come from the airlines during September and January,’ adds Yvonne.
If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.
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