Why are Airline Tickets so Expensive?

For more than two years, the main topic of conversation pretty much everywhere has been about the impact of Covid-19. Now that the worst of the pandemic seems to be over and people are traveling more freely again, another hot topic is on the tips of everyone’s tongues: expensive plane tickets.

People are looking for flights -- sometimes their first in years -- in a rush of what’s been termed “revenge travel.” Internet searches show sky-high airfares for many routes, yet travelers with wanderlust are opting to stomach the higher costs after being grounded for so long.“The demand is off the charts,” Delta Air Lines Inc. Chief Executive Officer Ed Bastian said at an industry conference last week, noting that fares this summer may be 30% higher than pre-pandemic levels. “It’s coming with leisure, it’s coming with premium customers, it’s coming with business, it’s coming with international. It doesn’t matter what the category is.”Global Movement

The trend is across geographies, though some places are more squeezed than others. Searches for a return economy-class ticket between Hong Kong and London on Cathay Pacific Airways Ltd. in late June turn up prices as high as HK$42,051 ($5,360), which is more than five times the typical cost before the pandemic. Direct flights between New York and London around the same time cost more than $2,000 in economy.

“Ticket prices are really expensive these days,” said Jacqueline Khoo, who works in tourism. Her company paid S$5,000 ($3632) for a colleague’s return trip with Singapore Airlines Ltd. to Hamburg later this month. That used to cost about S$2,000, she said. “It’s really amazing that an economy seat ticket would cost you so much.” A Mastercard Economics Institute study found the cost of flying from Singapore was on average 27% higher in April than in 2019, while flights from Australia were 20% more. Increasingly, travelers are booking tickets months in advance as they’re worried about the cost of buying at the last minute, said David Mann, chief economist for Asia Pacific, Middle East and Africa at the institute.  How Much Longer?

It’s unclear how long these high prices will persist, even as many travelers seem willing to pay up.“The rise in prices is a short-term phenomenon,” estimates Stephen Tracy, chief operating officer at Milieu Insight, a Singapore-based consumer insight and analytics firm. “Let’s all just hope that once these things equalize again, the prices come back down. I am fairly confident that they will.” In a few cases, fares are actually lower than pre-pandemic levels, according to Michael O’Leary, chief executive officer of Ryanair Holdings Plc. While there’s a prospect of more fares returning to levels they were at before Covid, the war in Ukraine and virus outbreaks are still risks, he said.

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