What is going on with airfare during the pandemic?

United Airlines plane flying
United Airlines plane flying

Out Travel

From price drops to sharp increases, airfare has fluctuated in a way that can leave many travelers confused, but what is causing these price changes? Scott’s Cheap Flights emailed over 2 million members this week to discuss what exactly has been going on since the travel industry was turned upside down.

Vacation scene at Puerto Vallarta, Mexico
Vacation scene at Puerto Vallarta, Mexico

Even in the best of times, airfare can be confusing. Airlines can normally count on a good chunk of any given flight’s revenue coming from last-minute bookings, especially from business travelers. However, in mid-March, when COVID-19’s severity became apparent, bookings dropped to near zero. With planes still scheduled to fly half-empty, and airlines knowing business travel had vanished overnight, this is when $26 roundtrip coast to coast flights and $168 flights to Europe began to appear.

“There were also lots of mistake fares during this time, like $23 round-trip to Puerto Rico and $210 round-trip to Chile, as airlines slashed their flight schedules,” says Scott’s Cheap Flights’ Andrew Hickey. “In the process, they made a few unfortunate pricing errors.”

Looking ahead, a May survey by LGBTQ research firm Community Marketing & Insights (CMI) yielded data from an online survey of 1,864 self-identified members of America’s LGBTQ community, ages 20-70. The report found 69% of participants “indicated extreme or moderate pent-up desire to travel again for vacation”, although, at the time, 72% of the travelers in the study had already canceled a vacation in 2020 because of COVID-19. The cancellations in the LGBTQ community were strongest for the March-July period.

Of those who took a vacation in 2019, 68% plan to take at least one overnight vacation trip during the remainder of 2020, including 42% planning two or more vacations before years end.

for the past five years we’ve been living in the Golden Age of Cheap Flights

There are three broad trends in the mainstream airfare market at the moment:

Domestic Deals are Flush

After launching domestic flight service this month, Scott’s Cheap Flights is finding domestic deals 75% off their normal prices every day. That’s because airlines have shifted much of their flying to domestic, recognizing that that’s where travel demand is right now.

International Deals are Sparse

Fewer overseas flights = fewer deals. The additional domestic flight capacity came largely from planes that had been flying internationally. With lower demand for international travel, airlines just aren’t competing on flights abroad like they had last year.

“We’re still finding plenty of cheap international flights for travel well down the line,” says Hickey. “Just not quite as many as before.”

Last-Minute Flights are Unusually Cheap

With business travel largely sidelined, there are far more last-minute deals than there are in normal times. As for what will happen after a vaccine is made available, Hickey has two guesses:

Cheap Flights Will Continue

“As Scott’s Cheap Flights members know well, for the past five years we’ve been living in the Golden Age of Cheap Flights,” says Hickey. “There are many economic forces causing this, from frequent flyer programs becoming money-printing machines to jet fuel becoming far cheaper than it used to be. These forces aren’t going away.”

In addition, airlines have many planes sitting in desert airfields, including the 737 MAX, which may return later this year, that they can bring back quickly to meet demand and keep fares low.

International Deals Will be Slower to Return

When consumer demand for international travel rebounds, so too will the number of planes flying those routes and, as such, the number of deals. But that demand could lag for a while.

For years before the pandemic, there had been a surge in international travel, enticing airlines to compete heavily and slash fares. When the pandemic hit, international travel virtually disappeared.

“Once a vaccine is approved and distributed, my guess is it will take years for many people to feel comfortable traveling abroad again,” says Hickey.

The good news is that, even if the overall quantity of overseas deals remains lower for some time, there will still be plenty to choose from. When international travel begins to return, the main airlines have to try to entice vacationers with slash fares.

Hickey says there are two common mistakes in thinking about airfare: assuming fares are static, and assuming fares gradually increase or decrease. Far from static, flight prices are more volatile than just about anything else we buy.

“The example I always remember is a round-trip flight from Atlanta to Amsterdam that was $800 when we searched on Monday, $300 when we searched on Tuesday, and $1300 when we searched on Wednesday, for the same flight and the same dates,” says Hickey. “If the flight you want is expensive today, your best bet is often to wait. Today’s price may have little predictive power of tomorrow’s price.”