Travelling has been more accessible throughout the years mainly because of the emergence of budget airlines and the number of flights to destinations worldwide increased. In 2020, travelling as we know it will change. As the world transitions to the new normal, how people move, whether for leisure or for business, will be greatly affected. As a result, flight pricing trends will also be affected.

2020 definitely brought new challenges and trends to flight pricing. We’ve rounded up the current flight pricing trends this year — from unbundling of fares to airfare reaction to the Covid-19 outbreak.

Unbundling of Fares and Low Airfare Prices

Expect to see the continued unbundling of fare such as new fare classes like “Basic economy” and “Premium Economy,” as well as add-ons like extra baggage, WiFi, and seat selection, in 2020 as a way for airlines to further compete.

By creating new fare classes and separating tickets into their different components, the industry has created more choices for consumers while maintaining low prices in the market.

Moreover, airfare will continue its downward trajectory in 2020. Lower prices are driven by multiple important factors such as heavy competition in the market, entry of lost cost carriers, and favorable jet fuel prices.

Airfare reached a four year low in 2019, with good deal round trip domestic airfare averaging just $275 per ticket, while round trip international airfare averaging around $800 per ticket.

International fares were down 4.6% compared to 2018, and 6.2% compared to 2017. Domestic fares have also further dropped, as prices were down 8.5% compared to 2018 and 17% compared to 2017 levels.

Stable Jet Fuel Prices and Low Cost Carrier Expansion

In 2020, jet fuel prices are expected to remain relatively stable. US Jet fuel prices ended in 2019 at $1.85/gallon, down by 18% compared to the same time in 2018. Fuel prices throughout the year remained stable month in and month out, following a longer term recovery from a large drop in mid 2015.

Entry and expansion of low cost carriers (LCCs) also greatly contributed to the downward price pressure on domestic fares in 2019, and is expected to continue in 2020. LCCs such as Frontier and Spirit Airlines, have been expanding their presence in both domestic and international markets, driving down prices on the routes where they offer service.

As a result, major carriers are pressured to drop prices in order to compete with no frills base fares offered by LCCs entering new routes, resulting in an average 17% price decrease. Close to 60 routes experience the entry of LCC in the US domestic market (+5.5% compared to previous year) in 2019.

Increase in airfare prices to hit some countries harder in 2020

Travelers in South Africa, Australia, and Indonesia will need to dig deeper in their pockets in 2020 as these countries are hit with airfare increases well above the global average. South Africans face overall fare increases of 8.9%, Indonesians are set to be slammed another 7.9% and Australians are facing a 5.1% rise, according to reports.

These are high compared to the average rise in the latest Global Travel Forecast by CWT and Business Travel Associations of 2.1% for the Asia Pacific and 1.2% with the rest of the world.

Additionally, the latest Global Travel Forecast by CWT and the Business Travel Association suggest that how great the impact of airfare increases depends on destination and in what class.

Australian business travelers for instance, are inclined to see 7.1% increase on domestic routes and a 6.1% rise on international flights. Economy travelers down under will witness a smaller 4.7% increase for domestic flights but a bigger 7.2% increase on international routes.

Other markets set to experience above-average increases include the Philippines (2.4%), New Zealand (3.1%) and China (4.4%). Asia Pacific countries set to evade big overall flight pricing increases include Japan, Hong Kong, India, Singapore, and South Korea.

Reports say that global uncertainty and slower economic growth has affected the once excessive growth of aviation in the Asia Pacific. Nevertheless, it remains the fastest-growing region.

Airfare prices seem to react to future virus outbreaks

As Covid-19 outbreak spread worldwide, experts believed that air travel posed a higher risk of infection by travelers at departure cities, travel destinations, airports, and on planes. As a result of falling demand for travel – flights from New York City to Orlando Florida, dropped as low as $30.

Nonetheless, some people may still want to take the risk of flying. When the severity of their current location and their potential flying destination naturally differs, travelers taking flight to much safer destinations is in fact a wise decision. This increased demand for flight tickets for certain routes has more than doubled in price. For instance, a one-way ticket from Boston to Beijing is priced at $4,291, with a notable duration of 40 hours.

Ticket prices seem to react to future epidemics. People are willing to pay higher prices for a trip to somewhere they believe to be much safer than their current location.

Policy change, on the other hand, is a common factor that affects prices of all flights departing from a given city. London-Beijing airfare soared starting March 18, two days after UK Prime Minister Boris Johnson made the speech about “herd immunity,” which made a lot of people uneasy. The daily airfare hike was $309. Other routes departing from London reacted similarly between March 16 to March 20.

Continuous Growth in Capacity

In 2020, airline capacity is expected to grow, but could be slower than expected given the continued uncertainty around the Boeing 737 MAX return to service and delays in the delivery of Boeing aircrafts on order for 2019 and 2020.

There were many unexpected challenges to service in 2019 – from the grounding of the Boeing 737 MAX planes in March 2019 to the collapse of Thomas Cook and WOW Airlines.

Despite these challenges, the total domestic capacity (number of seats flying) overall growth is +4% in 2019, which is driven by both major carriers (+3.2%) and low cost carriers (+13.9%).

What Does These Means For The Aviation Industry?

Even as flight prices go down, the number of people willing to travel will likely drop as well. Add to this the policies being implemented by different countries with regards to tourism, a number of airlines will be in bankruptcy.

The psychological after-effects caused by the quarantine and Covid-19 will lead consumers to modify their behavior, especially concerning mobility. Airplanes, which are confined spaces, will be abandoned in favor of private means of transportation. As a result, aircraft occupancy will fall, which will lead airlines to reduce traffic and eliminate direct routes.

Enhanced security measures will definitely be implemented such as systematic temperature checks and electronic bracelets to detect vital signs, as passengers demand new measures to ensure their safety inside the aircraft cabin.

Low-cost airlines will also likely capitalize on this new normal as their low prices would continue to attract customers. And finally, giant aircraft will be used less and less as airlines need more flexibility. They will opt for medium-capacity aircraft whose profitability is achieved with fewer passengers.

Drastic reduction of fleets, layoffs, adjustment to security management, accelerated closure of unprofitable subsidiaries, and low demand. These are the challenges the airline industry is facing.

References:

1. COVID-19: 7 specific impacts on the future of the aviation sector
2. Why Your Airplane Ticket is So Expensive Nowadays
3. Coronavirus Means Less Air Travel, But With More Flexibility
4. 2020 Travel Outlook: Hopper’s Projections for the New Year – Hopper
5. Airfare rises to hit some countries harder in 2020 – Airline Ratings
6. Growth of global air traffic passenger demand 2019 | Statista
7. Airline industry worldwide – number of flights 2019 | Statista
8. Annual change in average global airfares 2010-2018 | Statista