Airfare prices are dropping to more affordable levels after surging during the summer due to high travel demand. According to one economist, prices will continue to drop for at least the next month as the U.S. enters the fall season of travel.
“Price relief is here,” Hopper Lead Economist Hayley Berg said on Yahoo Finance Live (video above). “It will be here probably through late September or early October. And when that busy holiday season starts, we’ll see prices ramp back up close to about $400.”
One of the main factors in airfare is the cost of jet fuel. After reaching over $5.00 a gallon earlier this year, the price has since trickled back down. Part of this is because jet fuel prices are based on the price of crude oil, which spiked in 2022 before finally coming back down.
“The good news is we’ve already seen major relief on airfares, especially in the domestic market,” Berg said. “This August, airfare was down to about $286 for a domestic ticket, and that was down more than 25% from where we peaked back in May in the high $300 to $400 per ticket."
Berg noted that there are notable deals around Labor Day weekend for specific places in the U.S.
“Some of those most popular routes — destinations in Florida, Denver, Las Vegas — we are seeing incredible deals to many of those destinations," she said. "And it’s airlines trying to incentivize travelers to take that one more trip this year. So if it’s not Labor Day, it should be September or October. Airfares will be the lowest between September and October that they will be before the end of the year. So if you haven’t snuck in that last trip, now is the time to book it and plan to travel in the next eight weeks or so.”
Pent-up holiday demand 'to return with a vengeance'
Travel demand remained steady throughout the first half of the year, even as Americans grapple with record inflation that’s forced many to pull back on discretionary spending.
According to TSA, a total of 1,989,119 individuals traveled on Aug. 31 — the highest for that date since 2019. This doesn’t come as a surprise to Berg, however.
“What we typically see when there’s less extra money in the wallet for Americans or economic concerns is not a replacement of travel, but travelers looking for better deals, planning further in advance, using price monitoring tools so that they can get a lower price for the same trip or potentially going somewhere a little less expensive,” Berg said. “So we typically see the savings tactic start to happen.”
As the holiday season approaches, Berg anticipates ticket prices to increase substantially but doesn’t expect that to deter travelers, particularly those who were unable to fly last year due to COVID disruptions. Prices have already risen for Thanksgiving and December travel, which are the busiest times for flying, according to CheapAir.com.
"We are seeing behavior change, more toward the saving tactics rather than excluding purchases or not traveling,” Berg reiterated. “We have seen resilient demand for travel this year. So far, we have no indications that we’ll see demand impacted this holiday season.”
For example, Berg said, this summer saw “an incredible ramp-up” in travel demand, with prices peaking between $600-700 for domestic airfare.
“Yet, we never saw demand falter,” Berg said. “We actually saw travelers just paying more and more because they hadn’t traveled. This holiday season will be similar. With the delta and omicron waves last year, many travelers had canceled flights and didn’t make it home or to vacation for the holidays. And we’re expecting pent-up demand for the holidays to return with a vengeance. I think there will be tremendous demand in the market, despite more economic concerns from travelers.”
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at firstname.lastname@example.org.