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Airlines preparing for costly and busy demand for the holiday season as fuel prices hike

Overview:

  • S. jet-fuel prices have climbed since past pre-pandemic levels
  • The Air travellers have returned in droves but significant costs are drenched more of airlines’ profits
  • Higher fares could follow next

Huge Demand for Air Travel

Air travel is in high demand as the holidays approach. The costs are the same way.

Since 2014, jet fuel hasn’t been this pricey. To satisfy the rising demand, airlines are scrambling to hire tens of thousands of people. The airline sector is looking to hire pilots, flight attendants, reservations agents, luggage handlers, and a variety of other positions, all while competing in a tight labor market that seemed unattainable during the early stages of the pandemic.

In addition, the $54 billion in government payroll aid that helped airlines meet their labor costs during the crisis has been used up.

The industry’s attempt to return to profitability after losing a record $35 billion last year when the pandemic ended a decade of profits is being jeopardized by rising prices. Passengers may face increased ticket rates in the future as a result of the combination of returning demand and rising costs.

On Nov. 10, the national average price of jet fuel in the United States was $2.27 per gallon, up 25% from three months earlier.

According to Savanthi Syth, an airline analyst at Raymond James, the surge in fuel prices is postponing the profitability recovery. She also added that if it’s a gradual burn, planes will be able to handle it. This big increase in such a short time is unfavorable.

Airlines seeking to cash in on a rebound in demand have attempted to balance how much they can fly with their current personnel numbers, with different degrees of success.

Plans for Post-Pandemic

According to Cirium, an aviation analytics and consulting group, US carriers will fly around 6% fewer flights in November and December than they did before the pandemic in 2019. Frontier and Spirit Airlines, for example, are exceptions, with greater capacity scheduled than two years ago.

“All of these might ensure seamless operations at a lower cost than any potential operational disturbance,” said Bank of America airline analyst Andrew Didora.

While most airlines are chasing passengers with fare sales, the negotiation basement fares had already started fading in the spring, and few 2019 prices are coming back.

Domestic roundtrip rates will average $290 for a roundtrip around Thanksgiving, down 13% from 2019, and Christmas flights will average $390, on par with two years ago, according to fare-tracking app Hopper.

Holiday bookings are good, according to airline executives, and they do not expect any interruptions. According to an Adobe analysis released on Wednesday, airline bookings in the United States for the week of November 20 to November 25 are up 78 % from last year and up 3% from 2019.

Frontier Airlines CEO Barry Biffle said on a quarterly call Wednesday that his revenue management team is “acutely aware of the price of gas,” referring to the spike in energy expenses in general. He stated that they also fill up their autos.

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