Domestic airfare increased 1.8% between March and April, similar to our prediction of .7 last month
Prices are 10.8% cheaper this year as compared to last year
Airfare from Dallas rose by a whopping 29% while airfare from Cleveland dropped by 2.5%
We predict that peak prices this summer to be $19 cheaper than last year, a decrease of 6.4% from 2014
Our aggregate domestic airfare index increased by 1.8% from March to April, reflecting continuing demand for upcoming spring and summer travel. This puts the average price of a round-trip domestic flight at $253, up from $249 last month. This follows the more dramatic 4.7% increase we reported last month, which kicked off the spring and summer travel season.
Figure 1: Actual average domestic consumer airfare prices through April 2015 (solid line), with six month forward forecast price levels (dashed)
It’s not surprising that fares continued to increase in April, as fares typically increase throughout the spring to account for increased demand. Last year, our index increased by 2.8% in March and 3.4% in April -- so while the specifics may be different, the overall pattern is the same.
Figure 2: Year over year change in average domestic airfare, through April 2015 (solid line), with six month forward forecast (dashed)
While the current increase is largely seasonal, it’s noteworthy that last month’s average fare has declined 10.8% from April 2014, when it was estimated at $284. Prices at the beginning of last year were unusually elevated compared to the previous year, before dropping in the second half of the year. After a particularly steep decrease in February, prices this year are still well below last year’s despite the increases in March and April. While prices will likely increase further this spring, consumers have so far been enjoying better deals and can expect more of the same through the rest of the year.
In April, consumers were searching for flights a median of 36 days ahead, down from 39 days in March but still considerably higher than what we’ve historically observed at this time of year. This puts the typical departure date in May or early June, the beginning of the summer travel season. Last year at this time, the median search was only 28 days in advance.
Figure 3: Average advance purchase time between shopping for flights and booking. Higher values mean consumers are booking farther in advance
Not all markets experienced the same price changes last month. Here are airports where departing domestic flights saw the biggest average increases in price from February to March:
While these increases can be particularly dramatic, they mostly reflect routes with disproportionately large seasonal effects and routes that had previously been unusually cheap. Interestingly, Dallas tops the list for the second month in a row with a staggering 29% increase in prices after an increase of 21% in March. Last month, we noted that this increase was not surprising given that fares departing from Dallas in February were nearly twenty percent cheaper than in 2014. But while last month’s increase brought prices out of Dallas closer to normal, this month’s increase has left flights over 16% more expensive than last year. Interestingly, prices last April were a further 16% higher than price in April of 2013 - from this data, we can infer that prices out of Dallas are trending dramatically upward.
Despite the overall increase in airfare, some airport actually experienced decreases in average prices:
Like some of the price increases above, these changes mostly reflect recent pricing patterns for particular routes. For example, prices for flights departing from Cleveland decreased by 2.5% last month. Taking a closer look at individual destinations, it’s evident that this decrease is driven primarily by a decrease in prices to fly to Atlanta. Last month, we noticed a similar effect for flights departing from Fort Myers - indicating that prices to Atlanta can exert considerable influence on departure prices from other cities.
The map below shows the current price index for flights departing from each state, illustrating how prices can vary across the country:
Figure 4: Average domestic airfare for flights originating in each state.
It’s no surprise that more sparsely-populated states with fewer airports have higher prices. Wyoming, North Dakota, and Arkansas top the list with average prices around $400, while Massachusetts, Colorado, and Nevada are at the bottom with prices just over $200.
Smaller states also tend to have more volatile prices, and there were some pretty dramatic increases last month. Here are the biggest winners and losers, compared to the nationwide price increase:
Figure 5: Highest and lowest monthly changes in average airfare departing from each state, highlighting the “reddest” and “bluest” states from Figure 4.
While the figures above show how much it costs to fly from a given state, it’s also interesting to see how much it costs to fly to a given state:
Figure 6: Average airfare for flights arriving in each state, the opposite of Figure 4. To look at average prices for flights from a specific airport, use our interactive consumer airfare index tool at http://www.hopper.com/flights/tools/priceindex/index.html
The pattern here is very similar: it’s more expensive to get to more remote states with smaller and fewer airports. To instead see how much it costs to fly to each state from your home airport, check out our interactive map.
Looking forward to the rest of 2015, we anticipate that prices will continue to increase throughout the rest of spring and the beginning of the summer, with the largest increase in May 6.4%) and peak prices in June ($278). Relative to last summer’s peak of $297, peak prices are $19 and 6.4% cheaper.
Figure 7: Actual average domestic consumer airfare prices through April 2015 (solid line), with six month forward forecast price levels (dashed), comparing peak historical and projected prices.
Why do we think peak prices will be so much cheaper this year? It’s mostly due to how late and low prices bottomed out this winter relative to last year. Last year the index reached its lowest point in January, at $254, before rebounding strongly in February and March. This year, prices were even lower in January and continued to fall in February. As of April, prices have only just reached their January 2014 level, and with only a few months of peak shopping season left prices can only go so high.
Beyond this summer’s peak, if you’re already thinking about holiday travel, prices aren’t expected to rise again until September. As the year goes on, we’ll have a better idea of when, generally speaking, to buy your tickets for Thanksgiving or the winter holidays.
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Our 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.
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. ** Historical Analysis and Comparisons** Our index generally tracks the Bureau of Labor Statistics’ Airfare Consumer Price Index, which is a related aggregation of the prices consumers pay to fly which is more strongly influenced by more expensive business-oriented travel.
Figure 8: Comparing monthly changes measured by Hopper’s consumer airfare index with the BLS airfare consumer price index. The BLS index is strongly influenced by more expensive business-oriented trips whereas Hopper’s index focuses on leisure-oriented consumer travel.
Since this is the second month we’ve published a forecast, we can also begin to compare our current estimate and forecast to previous ones.
Figure 9: Comparing our current consumer price index and forecast (solid, dashed black) with our prior month’s forecast, showing only minor revisions.
Last month, we predicted a 0.7% price increase in April and a summer peak of $280, 5.7% lower than 2014. We instead observed a 1.8% increase in April - higher than what we predicted, but consistent in sign (greater than zero) and acceleration (price growth is lower than the previous month, which we observed at 4.7%).
Since the April data was consistent with our expectations, we have not revised our projection for 2015 substantially - price growth in May and June is now predicted to be slightly weaker, making the summer peak $2 cheaper.