As the new year comes into focus, I looked into current market trends and Hopper's own data to bring you four quick predictions for 2016.
Last year saw a big dip in prices, with Hopper calculating an overall 14.3% drop in airfare due to increased competition, decreased jet fuel prices (with futures selling below $1.40/gallon through December 2017), and airlines moving into branded, unbundled ticketing with lower base fares and optional ancillaries. That trend will continue, with January 2016 offering a historical three-year low of about $208 per round-trip (15% lower than January 2015). Spring fares will rise steadily and summer fares will see their usual spike due to seasonal demand, yet consumers will see better prices, more fare sales, and flexible ticketing options for the foreseeable future.
Ancillary revenues soared in 2015, and legacy airlines got a larger slice of that pie. We expect 2016 will bring more of the same. First, combine that strong revenue with the latest reports that valuable business flyers still overwhelmingly prefer the Big Three airlines. Then add to that new, nimble branded-fares designed to recapture price-sensitive leisure flyers (which is winning Delta applause from marketing experts and shareholders alike). American, Delta and United aren't going anywhere.
A strong U.S. dollar, lower airfares, and better access to budget-friendly accommodations should fuel a strong 2016 for the North American market. IATA forecasts 4.8% ASM growth with minimal change in load factors. A recent study by TripAdvisor estimates that 96% of Americans are planning on domestic travel this year, while Travelzoo says that 62% of U.S. travelers are planning an international trip (a 32% uptick over 2015). While geopolitical uncertainty throughout the Middle East and Europe will continue, this means that travelers may simply choose different destinations … but they're certainly not forgoing travel altogether.
Expansion into international markets is fundamental to 2016 growth for carriers operating from the U.S. The new year brings American Airlines' expansion into Sydney plus a slew of new service to Mexico and the Caribbean from from all over the U.S. (including from valuable markets DFW and ORD). Delta is boosting transatlantic service from the Midwest and JFK, including Detroit-Munich route with lie-flat beds and premium amenities aimed at corporate travelers. Meanwhile, United targets leisure travelers with two routes to Spain from DCA (a smart move, with little low-cost competition in that market) as well as non-stops to St. Kitts and St. Lucia amid carrier-wide Caribbean expansion. And, speaking of the Caribbean, JetBlue jumped into the booming Puerto Rico market with new service from FLL and added more flights to its growing Boston roster.
Perhaps most notable, though, is aggressive LCC expansion into transatlantic routes. WOW Air launches its budget service to Europe from LAX and SFO, and we imagine the downward pressure on price will be significant from the West Coast. Norwegian Air Shuttle throws its hat into the ring with new Oakland and more LAX to London service and moves forward with BOS-LGW and BOS-OSL plans as well.
Finally, China's budget airlines China Eastern and China Southern continue to spread their wings with new U.S. and inter-Asia service, and, of course, major U.S. carriers will scramble to open operations in Cuba.
2015 was big for the airline industry — and Hopper as well. Hopper earned Apple's #7 spot on the App Store Best of 2015 list (the only app in the travel category to make it). Now we're looking forward to a new year of innovation and growth, both for our millions of users and our valued partners.
Nick Young, Senior Director of Partnerships