The inflation rate has affected nearly all aspects of American finances including the vacation budget. One major travel expense is not only lower than last year, but it’s lower even than before the pandemic.
BLS data shows that June 2023 air fares are down by 1.33% compared to what they were at the end of 2019, which was a time when prices were on a downward trend. Prices are even lower than they were 10 years ago.
Despite the pandemic, airfares are on the decline
Prior to the pandemic in 2016, airfares were steadily trending down since 2014. There was a slight bump for 2019 but otherwise, they had been on a downward trajectory. Prices dropped dramatically in 2020 with the start of the pandemic. The average June 2020 airfare was 27% less than the June 2019 airfare.
But as travel returned, so did higher prices. In June 2021, airfares increased by 25% compared to the previous year. And airfares grew 34% between June 2020 and June 2021.
These increases may not be as large as you think if you look at the long term. The average airfare in 2022 will be just 0.4% higher than it was in 2014.
This is a comparison of how prices have changed in June 2014 using BLS data on inflation.
By 2023, the cost of airfare will be 19% less than it was a decade earlier.
Comparing this to the price of milk which, according BLS statistics, has increased by 9% in that time period. Prices for hotels are up by 28%. The price of admission to cinemas, theatres and concerts has increased by 33 %..
Why do airfares feel high even though they are cheaper?
Prices have increased for the majority of items over the last decade. Why do airfares feel expensive if they are 19% cheaper?
Not all routes are cheaper. According to data from the travel app Hopper, airfares for Europe are at their highest in six years. The average ticket price is nearly $1200. This is perhaps due to the fact that people, who would normally book an inexpensive domestic flight, are now taking expensive bucket-list trips.
Hayley, Hopper’s lead economist has her theories on why people think that airfares are more expensive. These include recency bias and shorter booking window.
Berg cited the number of people who traveled during this summer’s big holidays.
According to TSA data, the Fourth of July holiday weekend saw record air travel in the United States. More than 2.884 millions people passed through Transportation Security Administration (TSA) checkpoints before July 4. This was a record-breaking number of people, surpassing the old record set by 2.882 millions on the Sunday following Thanksgiving in 2019.
Berg affirms that “we often base our travel costs on the most recent trip.” For many people, this meant Memorial Day and July Fourth. Traveling on these weekends is always costly .”
Shorter booking windows
The closer to the departure date, the more expensive airfares are. Berg believes that people have been booking their trips later and earlier than normal. This may be a hangover from the pandemic years when many people booked at the last minute due to the uncertainty.
She says that people now book travel two weeks in advance. If I book a vacation today for two weeks in the future, I will pay more because booking at the last moment .”
Unbundling is another option, in which airlines offer lower prices for basic economy seats with few extras. Low base fares are often accompanied by additional fees, such as those for checking bags or securing a window or an early board.
Berg: “Unbundling can be a great thing, because it means you don’t pay a premium price for something you might not want.” “I’m happy to be in the middle if that means saving $100 .”
Berg admits it’s frustrating when you find a cheap flight but the price isn’t as low as advertised.
She says, “It’s like dying a million cuts when all the fees are added up.”
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