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.
As budget airlines try to recast themselves, major airlines are catering more to higher-paying travelers with premium ticketing options, which is reducing the proportion of seats in the cheapest category, industry analysts said. United, for example, offers five tiers of tickets ranging from basic economy to first-class, giving customers the option to pay more for a refundable ticket or a ticket that comes with free bags.
The price listed Thursday on United s website for a basic economy ticket from Los Angeles to New York on Saturday, Jan. 4, was $347, which allows the traveler to carry on only one small item such as a purse. Of the nine flights from Los Angeles to New York that United operates that day, basic economy tickets were still available on only two.
For $50 more, a customer could select a seat and bring a carry-on bag, but they would have to shell out $55 more to get a fully refundable ticket. A premium economy seat on the same flight was priced at $724 and a first-class ticket cost $1,643.
Similarly, Delta offers main cabin tickets and comfort plus tickets, as well as an option above first class dubbed Delta One. While a first-class Delta ticket from Los Angeles to New York on Jan. 4 cost $1,059, a Delta One ticket was priced at $1,599 and comes with lie-flat seats. Spirit s cheapest fare to New York from Los Angeles on Jan. 4 is $246, while its most expensive option is $416.
Sophy Chang, 32, recently flew Delta from New York to Los Angeles and chose the cheapest ticket option. Although her seat was toward the back of the plane, she said she was comfortable enough and grateful to be on a direct flight. She s a regular Delta customer and said she typically has a good experience.
I definitely wouldn t mind extra legroom, Chang said. On longer flights, it matters more to me.
Further widening the gap that has developed in the industry are conveniences and high-end perks offered by larger carriers that budget airlines can t match. Low-cost carriers have fewer direct flights to fewer destinations and lack the luxurious airport lounges that other first-class travelers have access to.
Delta recently completed a renovation of its two terminals at Los Angeles International Airport, including the addition of a Delta One lounge with private check-in and fine dining options. By the end of the year, Delta plans to offer customers more than 700,000 square feet of lounge space across 56 Sky Clubs and three Delta One lounges.
Demand for travel on Delta remains healthy with continued preference for our premium offerings, said Delta President Glen Hauenstein during the company s most recent earnings call. Our new Delta One lounges in New York and L.A. with dedicated check-in and private TSA security truly differentiate Delta s premium offering.
So far this year, 57% of Delta s revenue has been generated through sales other than main cabin tickets, Hauenstein said. The focus on higher-priced tickets reflects changes in consumer preferences, including a post-pandemic shift toward spending on experiences over tangible goods, experts said.
Since COVID-19, there are more people not wanting a miserable travel experience who are willing to pay more for a more comfortable journey, Fitzgerald said. It s been an arms race for the airlines to offer more of a premium product.
No-frills airlines that lack these perks are built to have lower ticket prices than the major carriers, but rising operating costs have made that difficult to achieve. Budget airlines need to pay the same prices for airport space, jet fuel and labor as the big players do, said Mike Boyd of Boyd Group International, an aviation consulting firm.
The pilot flying for Frontier, he or she wants the same money that the American Airlines pilot is getting because they re flying the same airplanes, Boyd said.
Budget airlines are also struggling in part because there are too many of them, including six publicly traded carriers such as Allegiant and Sun Country, Deutsche Bank s Linenberg said. The companies will have to consolidate in order to survive, leaving fewer ticket options for customers.
Many of them are losing money because they re all competing with each other for that same price-sensitive customer, Linenberg said. Part of the industry is going to restructure, and at the end of the day, the consumer will be facing higher fares.
According to a Deloitteholiday travel survey, 49% of Americans plan to travel between Thanksgiving and mid-January. 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. Twenty-nine percent of travelers this holiday season will upgrade their airfare this year compared with the type of ticket they purchased last year.
There will always be a market for low-fare tickets, but prices may never return to pre-pandemic levels, according to Fitzgerald at TD Securities.
There were good days of bargains that people were used to over the 2010s, he said. I don t think those are coming back anytime soon.
— Caroline Petrow-Cohen, Los Angeles Times
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