Tom Pipes, who lives in Colorado, didn’t want to spend more money on an airline ticket while he was traveling and shopping for the holidays. He took Southwest, the forerunner of low-cost airlines, from Colorado to Los Angeles.
After landing at Los Angeles International Airport this week, Pipes declared, “I wouldn’t use first-class if there was a first-class option.” For the price, I fly.
Unfortunately for Pipes and other passengers, it is likely that finding cheap tickets will grow more challenging.
According to data from the U.S. Bureau of Labor Statistics, the average price of a domestic flight in the United States rose by more than 4% in November of last year, to $269. It is a trend line that is anticipated to continue as big carriers in the sector push forward with strategies centered on more expensive, premium ticket options, while low-cost airlines falter due to growing expenses and a crowded field of competitors.
Tom Fitzgerald, an industry analyst at TD Securities, predicted that prices will rise and trend upward overall. You might not find as many discounts if you’re extremely price sensitive.
According to a Deutsche Bank research, the three biggest airlines in the world—American, Delta, and United—are expected to make up 97% of the operating profit of the sector in the United States this year. Low-cost airlines are trying to catch up by offering more costly seats with benefits like early boarding and increased legroom, which means there is less space on the aircraft for the cheapest tickets.
Spirit launched its version of first class this year after declaring Chapter 11 bankruptcy in November.JetBlue declared last month that it will introduce first-class seats to domestic flights by 2026, while Frontier will introduce a first-class option in late 2025.
According to Michael Linenberg, an airline equity researcher at Deutsche Bank, low-cost airlines are looking for methods to increase their earnings and are aware that consumers are prepared to pay more for superior products. There will likely be a net decrease of seats assigned to the lower-fare pricing buckets, and the average price will be higher.
The percentage of seats in the cheapest category is declining as big airlines cater more to higher-paying passengers with premium booking alternatives while budget airlines attempt to reinvent themselves, according to industry observers. Customers can choose to pay more for a ticket that includes free baggage or a refundable ticket by purchasing one of United’s five ticket tiers, which range from basic economy to first class.
A basic economy ticket from Los Angeles to New York on Saturday, January 4, cost $347 on United’s website on Thursday. This ticket permits the passenger to bring one small item, like a purse. Only two of United’s nine flights from Los Angeles to New York that day still had basic economy tickets available.
Customers may choose a seat and bring a carry-on bag for an additional $50, but they would need to pay an additional $55 for a ticket that is entirely refundable. The identical flight cost $1,643 for a first-class ticket and $724 for a premium economy seat.
In a similar vein, Delta provides main cabin and comfort plus tickets in addition to Delta One, an upper-class alternative. On January 4, a Delta One ticket with lie-flat seats cost $1,599, while a first-class Delta ticket from Los Angeles to New York cost $1,059 instead. On January 4, Spirit’s cheapest ticket from Los Angeles to New York is $246, while its most costly ticket costs $416.
Sophy Chang, 32, recently took the cheapest ticket option on a Delta flight from New York to Los Angeles. She expressed gratitude for being on a direct flight and stated she was comfortable enough despite being seated near the back of the aircraft. She said she usually has a positive experience with Delta, and she is a frequent client.
Chang remarked, “I would definitely not mind extra legroom.” On longer flights, it matters more to me.
Conveniences and upscale benefits provided by larger carriers that low-cost airlines cannot match are further increasing the gap that has formed in the sector. In addition to offering fewer direct flights to fewer locations, low-cost airlines do not have the opulent airport lounges that first-class passengers enjoy.
A Delta One lounge with private check-in and gourmet dining options was added as part of Delta’s recent renovations of its two terminals at Los Angeles International Airport. Over 700,000 square feet of lounge space will be available to passengers in 56 Sky Clubs and three Delta One lounges by the end of the year, according to Delta’s plans.
During the company’s most recent earnings call, Glen Hauenstein, president of Delta, stated that the demand for travel on the airline is still strong and that customers continue to favor its premium products. Our brand-new Delta One lounges in New York and Los Angeles, which feature private TSA security and dedicated check-in, really set Delta apart from the competition.
According to Hauenstein, sales of items other than main cabin tickets have accounted for 57% of Delta’s earnings thus far this year. The emphasis on more expensive tickets, according to experts, reflects shifts in consumer attitudes, such as a post-pandemic desire for experiences over material possessions.
According to Fitzgerald, more people are willing to pay more for a more comfortable trip since they don’t want to have a bad travel experience after COVID-19. The airlines have been engaged in an arms race to provide a higher-end product.
The goal of low-cost airlines without these benefits is to offer tickets at lower prices than the major carriers, but this has become more challenging to accomplish due to growing operating expenses. According to Mike Boyd of the aviation consulting firm Boyd Group International, low-cost airlines must pay the same rates as major ones for personnel, jet fuel, and airport space.
Because they fly the same aircraft, the pilot for Frontier Airlines wants the same compensation as the pilot for American Airlines, Boyd said.
According to Linenberg of Deutsche Bank, the overabundance of low-cost airlines, including six publicly traded ones like Allegiant and Sun Country, is another factor contributing to their difficulties. Customers will have fewer ticket selections as a result of the companies’ forced consolidation for survival.
According to Linenberg, many of them are losing money as a result of their competition for the same price-conscious client. The industry will undergo some restructuring, which will ultimately result in increased fares for consumers.
49% of Americans intend to travel between Thanksgiving and mid-January, per a Deloitte holiday travel poll. That number jumps to 66% among those with household incomes of $100,000 or higher, and falls to 34% among those who make $50,000 or less. Compared to the kind of ticket they bought last year, 29% of holiday travelers plan to improve their flight this year.
Fitzgerald of TD Securities said that while there would always be a market for inexpensive tickets, prices might never go back to what they were before the outbreak.
There were good days of bargains that people were used to over the 2010s, he said. Those are not likely to return anytime soon, in my opinion.
— Los Angeles Times’ Caroline Petrow-Cohen
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