Airfares will inch up 1% this year after years of cuts, forecast says
Over the past few years, airfares for domestic flights in the U.S. have fallen as much as 7 percent a year. But that trend may be coming to an end.
A forecast by a global travel consultant predicts that airfares in North America rise 1 percent this year, while hotel rates will increase 2 percent to 4 percent.
BCD Travel, a consultant that works with corporate travel managers, attributed the expected airfare increase to fuel costs and strong demand. The percentage of filled seats on each flight — known as the load factor — has also been at near record-high levels.
"High load factors may encourage airlines to pursue the fare increases they need to offset rising fuel and labor costs," the forecast said. "Prices are climbing slowly in the markets with the strongest demand."
BCD predicts that hotel rates will rise modestly this year partly because of the increased pace of hotel construction, especially in mid-scale and upscale tiers.
"Demand has been steady but not spectacular," the report said.
BCD’s fare forecast is directed at corporate business travelers who often get special group rates, but industry experts say corporate rates generally parallel fares for regular travelers.
Data from the Bureau of Transportation Statistics show that the average domestic airfare dropped from $392 in 2014 to $377 in 2015 and $349 for 2016. For the first nine months of 2017, domestic airfares fell to an average of $348, according to the federal agency.
Industry experts say predicting future airfares is difficult and is based on many changing variables.
Joe Brancatelli, a columnist on business travel, said that if fares rise at all, it won’t be by much because airlines are adding seats and planes at a high rate, which tends to push fares down. As for fuel prices, he said: "No one knows what fuel prices are going to be."
Airlines for America, a trade group that represents the nation’s largest carriers, declined to comment, saying it is prohibited from discussing future fares.