Airfare Close to Bottoming Out for the Season - Hopper Research

Airfare Close to Bottoming Out for the Season

Patrick
By Patrick Surry
Posted Aug 24, 2017

Summary

  • This month, we project a 2.1% decrease in domestic roundtrip flight prices to $217 in September from $222 in August as the off-peak fall travel season begins
  • We're forecasting that overall prices will continue to fall from their peak of $258 in June and bottom out in October at $216
  • Flight prices are expected to be up 2.3% compared to the same time last year
  • Jet fuel prices increased 8.5% in August, increasing to $1.54, still approximately half the recent high in Feb 2014
  • US Domestic capacity will experience a 2.1% YoY growth in September

Flight prices are expected to drop, which is normal for the season, as consumer demand for fall travel is typically less than the summer's. We're projecting that domestic airfare will continue to fall until October, bottoming out at $216. Prices are expected to be up about 2.3% compared to the same time last year and up 3.4% compared to two years ago. The price of jet fuel increased about 8.5% last month and still approximately half the price of early 2014.





Destinations to Watch on Hopper in September

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 on Hopper. If you're interested in visiting any of these destinations over the next few months, we recommend setting your watch on Hopper now so that you can be alerted about price drops this month.



Capacity Trends

The capacity of major US carriers grew 1.6% from September of last year for domestic and international routes. Foreign major carrier capacity grew 5.8% on U.S. international routes. Low Cost Carrier (LCC) capacity over the past year has drastically expanded. US LCCs exhibited a YoY capacity growth of 10.0% and 12.7% in domestic and international markets respectively; foreign LCCs grew 57.8% from September of last year.



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.

The capacity section looks at total scheduled seats across major carriers and low cost carriers (LCC's). US Domestic Flights includes all scheduled seats on flights within the United States and US International Flights includes all scheduled seats on flights between the United States and destinations outside of the United States.

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.