Airlines Expected to Raise Fares This Summer

Airlines Expected to Raise Fares This Summer

April 17th 2019

Experts believe the recent grounding of the troubled Boeing 737 Max along with other factors has the potential to drive fares up during the busy summer travel period.

CNN Business reports that last month’s temporary grounding took more than 370 jets out of service worldwide and halted the delivery of some new jets that would have otherwise been in operation by summertime, airlines’ peak travel season.

American, Southwest and United Airlines each recently extended 737 Max cancellations into July and August.

Low-cost carriers such as Southwest Airlines are among the 737 Max’s largest customers and fewer flights operated by discount airlines could result in less incentive for other carriers to offer lower prices.

“I think it certainly has the ability to pressure fares higher as we get into the busy summer months,” Helane Becker, an airline analyst for Cowen, told CNN.

“All the airlines have some extra planes at any period of time. But in the summer the system is strained more tightly,” added Philip Baggaley, the lead credit analyst for transportation companies for Standard & Poor’s. “It’s tough to disentangle the impact of the 737 Max from the other factors.”

A robust U.S. economy and low unemployment also mean increased demand for summer travel. What’s more, higher jet fuel prices—which are roughly 20 percent above where they were at this point a year ago, according to CNN—limit routes thus limiting passengers’ choices and keeping fares from falling.

Meanwhile, in Europe, the recent collapse of some budget airlines such as Wow Air has reduced competition, likely allowing fares to rise into the busy summer travel period.