2016 Will Bring the Cheapest Summer Airfare in Seven Years - Hopper Research

2016 Will Bring the Cheapest Summer Airfare in Seven Years

Patrick
By Patrick Surry
Posted May 3, 2016

Summary

  • We're projecting airfare will rise 5.6% in May and peak at about $240 in June.
  • Flight prices are down 12% from last year and more than 20% from two years ago, and are currently at lower seasonal levels than they've been since 2009. Although jet fuel is trading at prices not seen since 2004.
  • Trending Destinations: We're seeing increased search demand to New Zealand and Australia due to frequent flash sales. Search demand to Europe continues to slide.
  • Predicted Price Drops: If you're interested in going to Rio, we're predicting prices will drop 32% this month.

Flight Prices Will Remain Lowest In Years

Prices remained flat at $221 for a typical round-trip domestic flight in April, essentially unchanged from March, and slightly below expectations.

We're projecting consumer airfare will be $233 in May, a 5.6% increase from last month. Flight prices this summer will be down 12% from last year and more than 20% from two years ago. Airfare in June will be at lower seasonal levels than they've been since 2009. Although jet fuel is trading at prices not seen since 2004.

Prices will continue to climb through the spring into the busy summer travel season, with prices peaking in June at $240.

Figure 1: Actual average domestic consumer airfare prices through April 2016 (solid line), with six-month forward forecast price levels (dashed).

Figure 2: Recent jet fuel prices compared to consumer airfare. Both airfare and fuel prices were essentially unchanged through April.

Figure 3: A longer range view shows that airfare is at its cheapest seasonal level since 2009, although jet fuel is trading at prices not seen since 2004.

Table 1: Hopper's six-month forecast for consumer airfare, showing prices peaking in June, but still 12.5% below last year's peak, and more than 20% below summer two years ago.

Trending Destinations

These are the destinations that gained (and lost) the biggest search share on Hopper since last month.

Table 2: Domestic destinations with the biggest increase (left) and decrease (right) in search demand on Hopper since last month. School vacations have passed and travelers are looking at more northerly destinations again.

Table 3: International destinations with the biggest increase (left) and decrease (right) in search demand on Hopper since last month. Some great sales to Australia and New Zealand drove a lot of interest, and Europe continues to slide.


Destinations to Watch on Hopper in May

The Hopper app predicts future flight prices with 95% accuracy. If you select the "Watch This Trip" button, Hopper will constantly monitor prices and notify you the instant you should buy.

We calculated popular destinations for upcoming travel where you could save most by watching prices in Hopper. If you're interested in visiting any of these destinations in the next few months, we recommend setting your watch on Hopper now so that you can be alerted about price drops this month.

Table 4: Domestic destinations most likely to drop in price on Hopper in May


Table 5: International destinations most likely to drop in price on Hopper in May

Mapping Prices by State

To see how airfare from your state stacks up against the national average, our our interactive Consumer Airfare Index map and enter your home airport in the box.

Figure 4: Average price to fly to each given state.

Methodology

Our Consumer 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.

Our Consumer Airfare Index represents the price of tickets available for purchase in a given month, not necessarily for travel in that month. Since travel prices are represented in both time dimensions -- time of purchase and time of travel -- it can be difficult to interpret price dynamics. We use date of purchase because it reflects the price consumers are paying at a given point in time, and we report it alongside the typical advance purchase date to give an idea of how these prices translate into travel dates.

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 but is more strongly influenced by more expensive business-oriented travel. It's also released on a more delayed schedule than our index.

Figure 5: 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.