Folks, I almost spilled my coffee reading this one. So, it turns out that air fares aren’t coming down, despite the cost of jet fuel falling sharply. That’s right, Delta Air Lines just announced that their fares are up 11%-12% due to strong demand for travel. I guess that’s what happens when people really want to get out of town. Delta CEO Ed Bastian said that the strong demand for travel will keep fares high, and I’m thinking, yeah, no kidding. When was the last time you saw a cheap flight? It’s like finding a unicorn.
In its second-quarter earnings report, Delta said that its various measures of fares are up, and that it sees “sustainability” in those fares. I’m not sure what that means, but I’m pretty sure it means I’ll be paying more for my flights. Bastian told CNBC that “airfares are a function of supply and demand,” and that “the demand set is really strong.” Well, duh. I could have told you that. People want to travel, and they’re willing to pay for it.
The thing is, fuel prices paid by Delta increased 75% compared to a year ago, which is a big deal. But the strong fares lifted revenue from passengers by $1.7 billion, so I guess that makes up for it. Somewhere in Atlanta, a producer thought this sounded terrifying, and now we’ve got headlines screaming about high air fares. But let’s be real, folks, we’re not surprised. We know that when we book a flight, we’re going to pay a pretty penny.
Delta is projecting fuel costs in the current quarter will be down 20% from the adjusted fuel price it paid in the second quarter, which is good news, I guess. But Bastian said that fares across the industry are still lower than they were pre-pandemic, when adjusted for inflation. So, I’m thinking, okay, that’s not so bad. Maybe we’re not getting ripped off as much as we thought. He also said that if people are having concerns with respect to air fares, they have much higher concerns with respect to other products. Fair point, I suppose.
Bastian said one thing lifting fares is demand for travel from more affluent passengers. Delta’s premium passenger revenue was up 17% in the quarter, while main cabin revenue was up only 8%. So, it seems like the rich folks are willing to pay more for their flights, and that’s driving up prices for the rest of us. He also said that Delta’s core passenger base is “financially very healthy,” and that travel is a top priority for those consumers. Yeah, no kidding. If I had a lot of money, I’d be traveling all the time too.
The fuel price spike did cut into Delta’s second-quarter earnings, but the airline said strong fares should allow it to still hit the full-year earnings target it set in January. So, all’s well that ends well, I suppose. In conclusion, air fares are still high, but at least we know why. It’s all about supply and demand, folks. And if you’re willing to pay more for your flights, then that’s just the way the cookie crumbles. As I always say, you can’t make this stuff up. And now, if you’ll excuse me, I need to go book a flight and take out a second mortgage. 😊
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
