- Airlines have a record 260 million seats to fill this quarter.
- To achieve this, they offer more fare sales for off-peak travel.
- JetBlue, Spirit and Frontier all say average prices are falling.
A Frontier Airlines plane taxis past a Spirit Airlines plane at Indianapolis International Airport in Indianapolis, Indiana.
Luke Sharrett | Bloomberg | Getty Images
FORT WORTH, Texas — Airlines need to fill a record 260 million seats this quarter, and to do so they’re offering fares that will set you back about the same as a pair of movie tickets.
Southwest Airlines, for example, last month offered one-way flights of $29 for early morning or late-night flights, just one example of the airlines’ off-peak discounts.
“I would describe the level of discounting or sales that we’re doing today as a little more than normal,” Ryan Green, Southwest’s chief commercial officer, told reporters at the Skift Aviation Forum earlier this month. He said the industry’s increased capacity in recent months meant there were more seats to fill, even as the airline’s average fare rose last quarter compared to a year ago.
Leisure travelers have now largely returned to more traditional booking patterns after years of pandemic-related demand fluctuations, leaving airlines looking for ways to fill their planes outside of holidays or other popular travel times.
“Typically, every seven days before a flight, the price gradually increases,” said Scott Keyes, founder of Scott’s Cheap Flights, a flight deal company that recently renamed Going. But airlines are either lowering last-minute fares or not increasing them as much as usual, he said.
Airlines scheduled a record 259.8 million seats for domestic flights in the fourth quarter, up nearly 8% from a year ago, on 1.86 million flights, up 6% from 2022, according to aviation data firm Cirium .
Finding the right balance in the off-season is a challenge for airlines, which generate the majority of their revenue in the second and third quarters during the busy spring and summer seasons. Most major airlines reported record revenue and strong demand during these periods, with some executives reporting higher growth in international destinations than domestic destinations.
U.S. inflation for September showed airfares fell more than 13% from a year ago, while overall consumer prices rose.
JetBlue Airways said third-quarter average fares fell more than 12% to $201.73 over the same period in 2022.
Budget carrier Spirit Airlines said fares fell nearly 28% from a year ago to $48.73, even as revenue from non-ticket revenue, which includes ancillary services such as seat selection fees and checked baggage, fell by $1 % rose to $67.70.
The Miramar, Florida-based airline, which is trying to buy JetBlue, warned of price cuts ahead of Thanksgiving, saying: “Unfortunately, we have not seen the expected return to a normal demand and pricing environment for the peak holiday periods.”
Frontier Airlines, also an ultra-discounter, said average fares were just over $39 last quarter, down 32% from a year earlier.
All three airlines are forecasting losses for the final three months of the year.
Declining off-peak pricing power has forced airlines to rethink where their aircraft operate.
Southwest plans to slow its growth next year to meet changing demand patterns, although CEO Bob Jordan called demand “strong” in an earnings call late last month.
“Capacity is the most valuable asset you have to generate revenue, and you have to deploy that capacity against demand as efficiently as possible,” Jordan said during the Skift Aviation Forum.
The airline plans to fly less on non-peak days such as Tuesdays compared to times of higher demand, a move that also prioritizes crews’ time so they are prepared to fly more when things are busy, Jordan said.
Frontier Airlines CEO Barry Biffle told CNBC that, among other things, the airline is finding less crowded markets for its flights.
“We are focusing our growth away from saturated markets,” he said. “We won’t be shrinking in Orlando and Vegas, but we probably won’t be growing either.”
As demand changes, eye-catching, double-digit tariffs arise.
But they tend to sell out quickly and are unlikely to be available during the peak holiday season, and demand is expected to reach or even break records.
Delta Air Lines expects to carry between 6.2 million and 6.4 million passengers during the Thanksgiving period Nov. 17-28, compared to 5.7 million last year and 6.25 million in 2019. United Airlines expects to carry 5.9 million passengers from November 17 to 29, up 13% from last year and 5% from 2019. American Airlines forecasts a record 7 for the period from November 16 to 28, 8 million travelers, up from 7 million last year, surpassing 2019’s roughly 200,000 customers.
Southwest CEO Jordan said year-end vacation bookings are exceeding last year’s pace.
Flight tracker Hopper said “good” domestic fares, which it defines as the bottom 10th percentile of available fares, averaged $248 for Thanksgiving, compared with $271 last year and $276 in 2019 .
Airlines are currently mulling over their 2024 schedules to try to get the most out of their planes while facing higher costs like fuel and labor that are cutting into margins.
“You see airlines offering fares that are similar to our fares, and you should really think about the fact that that’s not going to last,” Frontier CEO Biffle said, citing costs.
Airlines have become increasingly sophisticated in dealing with changing demand patterns, meaning they can cut flights or capacity during periods of slow travel.
Fares are expected to stabilize next year, but it’s too early to say what the special fares will be, said Henry Harteveldt, founder of travel industry consulting firm Atmosphere Research Group.
“If inflation really continues as high as it has and hiring slows, airlines may feel the need to invest in greater support,” he said.
An advantage for full-service airlines is the variety of fares and products they can offer, from basic, no-frills economy class to first class, Harteveldt. This means they could increase their inventory of cheaper basic economy fares during times of weaker demand or increase fares when demand for premium seats is high.
Airlines “have the most advanced cash registers of any industry,” he said.
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