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  • Writer's pictureThe San Juan Daily Star

Airline ticket sales exceed a 2019 milestone for the first time

Hartsfield-Jackson Atlanta International Airport. Airlines sold more tickets and collected more revenue from domestic flights in February than in the same month in 2019.

By Niraj Chokshi

Rising fuel prices may present an obstacle, but the airline recovery in the United States appears to be on track for now.

With the omicron coronavirus variant receding and pandemic restrictions being eased, the airline industry turned a corner last month, according to an analysis by the Adobe Digital Economy Index, which draws on online sales from six of the top 10 U.S. airlines. According to the analysis, ticket sales for domestic flights in February exceeded those for the same month in 2019, a first since the pandemic began two years ago.

Travelers spent an estimated $6.6 billion on domestic flights in February, about 6% more than three years earlier, according to the analysis. The number of tickets sold was up 4%, while fares were up about 5%, lagging overall inflation. Early data indicate that the trends are holding up this month, too.

“We’re seeing things open up in terms of people’s thinking about travel,” said Vivek Pandya, who led the analysis. “The question now becomes: How much can that momentum continue to push forward?”

The data bodes well for airlines, which have been preparing for months for what the industry expects to be a robust summer travel season. Consumers appear to be optimistic, too: The number of tickets sold last month for domestic travel between June and August was down just 3% from the number in February 2019, according to the analysis.

But while hopes are high for the months ahead, there is concern that rising fuel prices and persistent inflation could pressure airlines to raise fares and discourage potential customers from flying.

“Between the fuel impact and the discretionary income impact on leisure travelers, it’s going to slow whatever would have been happening,” said Samuel Engel, a senior vice president and airline industry analyst at ICF, an advisory firm.

Russia’s invasion of Ukraine sent oil prices soaring, raising the cost of jet fuel, which is one of the biggest line-item expenses for airlines. And while the global price of jet fuel has declined somewhat from its post-invasion peak, it ended last week up 19.5% from a month earlier and up about 82% over the last year, according to the Platts Jet Fuel Price Index.

American Airlines and United Airlines are particularly exposed to ballooning fuel costs, while Delta Air Lines is somewhat insulated thanks to its refinery in Trainer, Pennsylvania. Southwest Airlines employs an investing strategy known as “hedging” to offset spikes in the price of fuel, which it estimated will cover as much as 64% of the fuel it could consume this year.

U.S. airlines may try to cover fuel-price increases by raising fares, a process that can take months to play out, but carriers typically are limited in how much they can pass on to customers, industry analysts said. And with the rebound being led by leisure travelers, who are far more sensitive to ticket prices than corporate travelers, airlines will have to tread carefully.

Other options include cutting flights that are barely profitable or reining in plans to restore flights.

“In general, growth may slow, or, as is the current case, capacity that airlines would have brought back if the pandemic continued to recede won’t return,” Helane Becker, an airline analyst at the investment bank Cowen, wrote in a recent research note.

At the same time, some consumers facing higher prices for goods and services may not have much left to spend on vacations, experts said. And while some budget carriers may target those travelers, there’s no guarantee that airlines will cut fares across the board, especially when facing steep debt accrued during the pandemic and pressure from shareholders eager to see profits, said Henry Harteveldt, a travel industry analyst and the president of Atmosphere Research Group.

“Airline CEOs are not in a generous state of mind these days, nor are their CFOs, so I’m not expecting airlines to discount seats to the same extent that we may have otherwise seen,” he said. “I think that there’s a lot of pressure on airlines to keep their airfares as high they can.”

Depending on how Russia’s war on Ukraine plays out, airlines may also not see the rebound in lucrative trans-Atlantic travel that they had expected, experts said. But domestic and short-distance international travel have and will continue to lead the recovery. And despite the hurdles in the industry’s way, analysts and airlines are preparing for a strong summer season.

“What we’ll end up with is a domestic summer that looks very good as opposed to great,” Engel said.

As of Monday, airlines had more than 2.1 million domestic flights scheduled from June to August, according to Cirium, an aviation data provider. That figure could change substantially in the intervening months, but is currently just 8% lower than the number of flights scheduled over the same months in 2019. Last summer’s scheduled flights were down 16% from the summer of 2019.

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