At the bottom of travel, when fewer than 90,000 people a day were clearing airport security in the U.S. back in April, you could buy cross country flights for as little as $13 – and most of that was taxes.
Fares that low didn’t make sense. With base fares under $3 (excluding taxes) airlines weren’t even covering their costs to transport an additional passenger from Florida to California.
However you’ll know the airline industry is healthy again when we start to see really low fares. There are good deals around right now, but few great deals. There haven’t been very many fares that I’ve written about on this site. And that’s because the deals that are around are good if you’re buying travel anyway, but not worthy of jumping on and making the decision to travel for you.
In the latest Airlines Confidential podcast former Spirit Airlines CEO Ben Baldanza makes the point that a period of low fares will mean that we’re finally looking at sustained recovery for the airline industry.
That’s counterintuitive in a way. Why aren’t higher fares good for the airlines?
And I’m reminded of something I’ve written about before during the pandemic: after 9/11 airfares rose even though planes were flying empty. The only people traveling right after the terrorist attack were people who really had to travel. People who were staying on the ground weren’t making that decision because ticket prices were too high, and lower fares wouldn’t have gotten them back on planes. Of course by the start of 2002 cheap fares were all around – I couldn’t really spend more than $300 roundtrip for advance purchase coast-to-coast or for flights to London.
[T]he people who are flying today really do have to fly and that’s why they’re on the airplane, which is a little different than they’re choosing to be on the airplane, so they might decide “well I won’t go if the fare’s too high.” …more people who could truly make the decision ‘we’re going to fly on this trip or we’re going to drive, or we’re not going to make this trip at all’ ..once we see that kind of behavior happening it’s going to be better for the industry to think about returning to a full kind of normal in terms of demand.
Low fares will signal that it’s possible to encourage people to travel again with good deals. High fares suggest discretionary travelers are still staying away.
Once normal returns, airlines will prefer fares to be higher rather than lower, because filling planes at higher fares is better for them than filling all of their seats at a lower price. But when airlines are still grounding much of their fleets, high fares are a signal that airlines don’t have the ability to stimulate traffic yet.