Fares Too High?
Don't Book 'Em.
THURSDAY, MAY 5, 2022 -- The riverfront compound that houses the vast, worldwide JoeSentMe headquarters is heated by oil and therein hangs a tale of insanely high airfares and the tactic of sitting on your hands and doing as little as possible.

Once upon a time, in a galaxy far, far, away--that would be back in January--JoeSentMe's energy provider delivered heating oil for $3.89 a gallon. February's delivery price jumped to $4.34 a gallon. In March, oil was $5.49 a gallon. No April delivery because, as my supplier explained, prices were "astronomical."

And herein lies the conundrum. May is usually top-up month, when the supplier fills the oil tank one final time and assumes no other deliveries will be needed until well into the fall.

But my energy provider called today and asked if I wanted to defer the end-of-winter top up.

"Prices are crazy," she explained. "If we deliver, it's $6.76 a gallon and that's hard to justify. You can skip it and wait for the fall."

Having already skipped April's delivery, however, I was concerned that a May cold snap could leave the JoeSentMe staff--that's me, folks--shivering if the oil tank went dry.

"Well," my energy supplier explained, "we can do a top-off delivery of just 75 gallons. We could go that way."

I accepted and thanked my supplier for its conscientious attention to prices and willingness to have its customers' collective backs in these extraordinary times.

What's all this got to do with the cost of tea in China and the price of airfares in America, you ask?

There is the obvious: Rampaging energy prices are driving airfares up. According to the Argus Spot-Market Index, airlines paid an average of $2.75 a gallon for jet fuel on February 4. They paid $4.85 a gallon today. All of those extra dollars are being built into ticket prices, of course. If you want to do the math, consider: A one-way New York-Los Angeles nonstop will consume something like 5,300 gallons of fuel. That means carriers may be shelling out an extra $11,000 in fuel for each transcontinental flight they operate.

But wait, there is more. Demand for airline seats is also skyrocketing as much of the world shakes off the pandemic. According to daily airport checkpoint numbers compiled by the TSA, traffic reached around 90% of 2019 volume during much of April. It's eased off a bit so far this month, but airlines say their bookings for summer may meet or even surpass the record volumes recorded in 2019, that long ago pre-pandemic wonderland.

And still more: Airlines are still flying many fewer seats than they operated in 2019. The exact numbers are hard to track because of regional fluctuations, seasonal variations and the continued impact of the pandemic. But OAG, the industry's schedulekeeper, says that summer capacity will only reach 85-93% of 2019 levels.

Can you say confluence? Good, because the confluence of high energy prices, rebounding demand and lower capacity is--you guessed it--outrageously high airfares.

How high? Statistics are meaningless and averages are useless because no one pays an "average" fare. So how about some relevant anecdotal experiences relayed to me this week by JoeSentMe members:
        One member and his wife were hoping to extend a pre-planned Italian holiday in June by a week. They scored a fine advance-purchase deal--$1,400 roundtrip on La Compagnie, the French all-business carrier trying to bootstrap a Milan route--so were shocked when they tried to change. Roundtrip fares were now quoting in the $4,400 roundtrip range.
        A member was booked in business class on a Jakarta-Chicago flight on Emirates Airline. When he tried to adjust a segment, Emirates, the first to impose fuel surcharges after Russia invaded Ukraine, wanted to tack on an extra $1,200 in fees.
        One member has been trying for three years to get his family to an end-of-year vacation in Grand Cayman, where he'd booked a beachfront villa before the pandemic. Attempting to claim his villa credit for this winter, United quoted him $12,000 roundtrip for four tickets from Houston to Cayman.

Sadly, I have no silver bullet for battling this run-up in fares that is affecting flights both long haul and short, domestic and international. But I do have some suggestions.

If you're comparing fares to what they were in 2020, when prices plunged as lockdowns depressed traffic to levels not seen since the 1950s, you're living in a fantasy world. Comparisons to last year's prices are also irrelevant. After all, even in the busiest months in 2021, passenger traffic was in the 50-70% range compared to 2019. Airlines didn't have the pricing power that they have now. While I'm not suggesting fares today are "fair"--and we know there is no "fair" in airlines--I am suggesting you at least look at prices through the lens of 2019. In most cases--certainly not all, but most--the fares are hovering around 2019 levels.

As my energy supplier suggests, don't buy oil or tickets now if you can avoid it. If you're looking to book a fall or winter trip, delay your decision until at least Memorial Day, maybe even the Fourth of July. I am guessing the triple play of high energy costs/high demand/low supply will peter out soon. Fuel prices will decline. So will the pent-up demand for travel, especially after people are reminded how rough it is on the road. I'd gamble that now is the high-water mark for airfares. My hunch is that fares will begin to moderate in the weeks ahead.

In past fare crises, travelers could burn miles to avoid high cash prices. Not this time. As airlines have moved to "dynamic" pricing, award costs move with (or even above) the cash price. That's especially true for high-demand international premium class travel. Hate spending six grand on a business class ticket to London or Santiago? Well, you're surely going to hate to burn 600,000 miles each way for the same ticket. Do check the award price before you book for cash, but do not be shocked if you find no solace or solution there.

Like my energy seller's 75-gallon solution, only buy the travel you need immediately. Got a sales call in Chicago or Calgary or Cologne next week? Grit your teeth and purchase the best fare you can find. But worry about June travel in June. There's just no benefit in booking right now.

Remember Zoom? I can't imagine a client who'd force you to appear in person when you explain the fare situation. Use a video conference instead. It worked for two years when we couldn't fly, didn't it? Meanwhile, if you're looking to book a holiday that seems out of financial whack, don't buy overpriced seats. Travel elsewhere. Or stay home. You remember home, right? It's where we've been hiding out for most of the last three years.