Consumer Airfare Index - February 2020

Airfare rises in February, but reaches historic 7 year low for the month

Hayley Berg - Jan. 27, 2020

Summary

  • This February, we project a 6.2% increase in domestic round-trip flight prices to $203 compared to low January airfare levels. 

  • Flight prices are projected to be down 5.8% compared to 2019 levels, and reaching the lowest February levels since before 2013.

  • Hopper’s six-month forecast for consumer airfare shows prices rising through late spring with spring break travel demand, before dropping in July.

  • Jet fuel prices rose 2.7% in the most recent month of reporting data compared to the previous month, to $1.87/gal. 

Consumer Airfare Index - February 2020

Leisure travelers can expect historically low domestic airfare prices this February due to a number of key factors, including heavy competition in the market, entry of low cost carriers and favorable jet fuel prices. While jet fuel prices rose slightly compared to last month, jet fuel prices have remained relatively stable despite US tensions with Iran. We’re expecting a 6.2% monthly increase in flight prices, reflecting increased demand for upcoming spring and summer travel. Despite these moderate increases from last month, it’s still the cheapest February prices that we’ve observed since 2013. 

Travelers may want to snag these low flight prices while they can. Fares typically increase gradually through the spring and then peak in June as travel demand picks up. It’s also unclear whether airlines will increase prices this summer due to Boeing’s updated timeline for the 737 Max. The company recently indicated that it doesn’t anticipate regulators will sign off on the 737 Max until June or July. While the 737 Max groundings didn’t significantly impact summer travel prices in 2019, the continued delay may have a somewhat larger impact this year as airlines plan their capacity growth. 

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Figure 1: Actual average domestic consumer airfare prices through February 2020  (solid line), with six-month forward forecast price levels (dashed), showing prices rising in February through June, then beginning to drop in July.

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 Figure 2: Jet fuel prices rose 2.7% in the most recent month of reporting data compared to the previous month, to $1.87/gal.

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Figure 3: A longer range view shows that jet fuel prices were growing again since a drop in 2015, and appear to have plateaued in recent months.

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Table 1: Hopper’s six-month forecast for consumer airfare, showing prices rising through late spring, before dropping in July.

Destinations to Watch on Hopper in February

The Hopper app predicts future flight prices with 95% accuracy. If you select the “Watch This Trip” button, Hopper will constantly monitor prices and notify you the instant you should buy. 

We calculated popular destinations for upcoming travel where you could save most by watching prices on Hopper. If you’re interested in visiting any of these destinations in the next few months, we recommend setting your watch on Hopper now so that you can be alerted about price drops this month. 

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Table 2: Domestic destinations most likely to drop in price on Hopper in February.

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Table 3: International destinations most likely to drop in price on Hopper in February.

Capacity Trends

The capacity of major US carriers changed 0.0% and 1.3% from January of last year for domestic and international routes respectively. Foreign major carrier capacity grew 2.1% on U.S. international routes. LCC capacity over the past year has drastically expanded. US LCCs exhibited a YoY capacity growth of 20.9% and 3.4% in domestic and international markets respectively.

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Methodology

Our Consumer Airfare Index combines search data for every origin and destination in the United States, providing a near real-time estimate of overall airfare prices - unlike other comparable indices that can lag by several months. 

Our Consumer Airfare Index represents the price of tickets available for purchase in a given month, not necessarily for travel in that month. Since travel prices are represented in both time dimensions -- time of purchase and time of travel -- it can be difficult to interpret price dynamics. We use date of purchase because it reflects the price consumers are paying at a given point in time, and we report it alongside the typical advance purchase date to give an idea of how these prices translate into travel dates.

Other indices simply take the average of all fares to represent overall price which skews the results toward expensive fares and can give an unrealistic impression of the true cost of flying. We instead use what we consider to be a “good deal” for each route to reflect what consumers should reasonably expect to pay.

Since our index is constructed and forecasted at the origin-destination level, we can also provide comparable estimates for any combination of routes and extract insights on pricing not only across time, but also across different markets. We use monthly passenger data from the Bureau of Transportation Statistics to ensure that each domestic route is properly represented in the final index based on its share of total passengers. 

When predicting future prices, we also consider a few key features of airline pricing. First, prices within a given route will fluctuate with the number of passengers.

Second, prices change predictably with the seasons, especially during the peaks of summer and holiday travel. Of course, much of this variation has to do with increased demand - but in peak travel seasons, airlines can raise prices not only because there are more people interested in travelling, but also because the average traveler is willing to pay more for their summer vacation or trip home for the holidays.

Finally, changes in prices may persist, especially if there are underlying conditions pushing prices up or down, as these effects may be spread over several months. Conversely, the opposite may be true - after a big price increase or drop, fares are more likely to change in the opposite direction in future months. Since dynamics like these and the above aren’t always consistent, we evaluate future prices at the origin-destination level to capture the unique properties of pricing for different routes. 

Of course, predicting the future is no easy task, and many factors that influence pricing are simply unforeseeable. However, by exploiting the factors that are predictable, like trends in passenger distribution, seasonal variation, and recent price activity, it’s possible to extract insights about the near future of pricing.

The capacity section looks at total scheduled seats across major carriers and low cost carriers (LCC’s).  US Domestic Flights includes all scheduled seats on flights within the United States and US International Flights includes all scheduled seats on flights between the United States and destinations outside of the United States.

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