Average domestic fare forecast to be 3.6 percent cheaper than a year ago. Yet airlines still are enjoying record profits, thanks to extra fees and low fuel costs.
If you plan to travel this fall, expect to pay the lowest airfares in years.
The average domestic airfare for the September-through-November period is forecast to be $248, or 3.6 percent cheaper than in fall 2014 and 8.1 percent cheaper than in the same three months of 2013, according to the Boston flight research site Hopper.com.
That’s sounds like great news until you dig deeper into the numbers.
One of the key reasons the nation’s airlines can keep domestic fares low is that the industry’s biggest expense — fuel — has dropped about 30 percent over the last year.
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Given that, airline critics say the decline in fares should be even bigger.
“The fares haven’t dropped much given how dramatically fuel prices have dropped,” said Tyler Hanson, the data scientist for Hopper.com who crunched airfares for the study.
“They are not passing everything on to consumers. They are keeping some for profit,” Hanson added.
Thanks to the drop in fuel costs, Southwest, United, Alaska, Delta and American airlines all reported record-high profits in the three-month period that ended in June.
Another reason airlines can keep fares low is that they are generating more of their overall revenue from fees for checked bags, reservation changes, food, entertainment and seat upgrades, among other charges.
In the first quarter, the nation’s largest carriers collected $863 million in bag fees, a 9 percent increase over the same period in 2014, and $768 million in reservation change fees, a 6 percent increase, according to the U.S. Department of Transportation.
Also contributing to the fare drop, Hanson said, is the expansion of low-cost carriers that offer rock-bottom prices along with cramped seats and passenger fees for a growing list of services.
Airfares should start to creep back up again once demand increases for the holiday travel season, Hanson said, bringing overall fares for the year on par with last year’s prices.
Meanwhile, airline executives are predicting hefty profits for the rest of the year — as long as fuel prices remain stable.