Every week, I find myself engaged in discussions about the seemingly high cost of flights. Despite prices being 2% lower than a year ago, the perception remains. Let's dive into the factors that have brought us to this point.
1. The Industry
Reports say airlines have lost 21% of their workforce over the past five years. These shortages are stressing the system and those in it. Airlines must cut flights for safety reasons while strategically creating routes to maximize both passenger numbers and profits with the available workforce.
Airlines aim for full capacity on every flight because an empty seat translates to lost revenue. Unlike other industries, they can't save up unused inventory for future use.
2. The Economy
From fuel to salaries and houses to clothes, prices for nearly everything have gone up. While some attribute it to inflation, others point to last week's record high on the stock market.
Union demands have led to negotiations for higher wages within the airline and supporting workforces. However, these higher wages inevitably result in increased prices as the funds must be found somewhere.
It's important to consider the last time you flew. If it's been a while, of course it will be more expensive just as like if you haven't gone to the movie theatre in a while you'd be certain to notice that prices have gone up there as well.
3. The Globe
The travel industry suffered significant blows during Covid-19 as people deviated from all usual travel patterns.
While many travel destinations were able to fully close down, airlines kept flying with record low seats filled. Then implementing social distancing on flights meant that every unoccupied seat equated to lost revenue for airlines. The industry is still in the process of recouping these lost dollars.
What does all of this mean?
The escalating costs of air travel in the past five years result from a complex interplay of industry, economy, and global factors. From fuel prices to operational expenses and market dynamics, multiple elements contribute to the final ticket price.
I know we all think these huge airlines are rolling in the dough. However, according to an article from Reuters, "The airline sector returned to profitability in 2023, with net profit expected at $23.3 billion on a 2.6% margin, and is set to reach $25.7 billion and a margin of 2.7% next year, the International Air Transport Association (IATA) said."
These margins aren't substantial for any business!
Simply stated, prices aren't going to return to the levels we wish they would. But like so many things, they're out pacing inflation. This is why we need to plan as far in advance as possible to secure seats as soon as the airlines release their calendars.
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