Airline fares surge as travel demand picks up

After two years of pandemic-related travel restrictions, a wave of re-openings has spurred a surge…

After two years of pandemic-related travel restrictions, a wave of re-openings has spurred a surge in demand for plane travel. But consumers rushing to plan their summer vacations are facing ticket prices that are more expensive than ever.

Airline fares soared 18.6% in April, according to the Bureau of Labor Statistics’ latest read on the Consumer Price Index (CPI) out Wednesday.

The jump marks the largest increase since the inception of the series as a component of the public transportation index in December 1963 and further builds on March’s 10.7% monthly rise in airfares. On an annual basis, airline fares logged a 33.3% increase from the same time last year, the largest 12-month rise since the period ending December 1980.

Higher prices for air travel come amid a surge in fuel prices and pent-up demand for travel as COVID restrictions ease, also standing high amid broader inflationary pressures that have hit consumers at the grocery store, gas station, and housing market.

“The unleash of pent-up demand has been a major driving factor, as the desire for air travel is coming back more aggressively than anticipated,” Vivek Pandya, lead analyst at Adobe Digital Insights, said in a note.

Prices for air travel were among the largest contributors to core CPI, which excludes energy and the similarly volatile food category. While headline consumer prices cooled to 0.3% on a monthly basis from 1.2% in March, core prices rose more than expected at 0.6%, compared to the 0.4% consensus economist estimates had projected.

“One of the main drivers of the upside surprise was a record 18.6% increase in airline fares, which added 13 basis points to core CPI alone and reflected a boost from reopening pressures,” economists at Bank of America said in a note Wednesday.

“Overall, this was a noisy report given the move in airline fares, so some of the strength should be faded,” BofA said. “That said, underlying inflation pressures remain elevated.”

Still, although the era of cheap airfares has ended, elevated prices have not deterred demand for plane travel.

In March, consumers spent $8.8 billion on domestic flight bookings, a 28% increase over 2019 levels before the pandemic and a 32% increase from $6.6 billion the month prior, according to the latest available data from the Adobe Digital Economy Index, which tracks the airline recovery with new U.S. domestic flight bookings online. This came even as prices for online domestic flight bookings were 20% higher in March compared to 2019 levels and 15% higher month-over-month, per Adobe.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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