Summer travel's start promises another season of record travel

According to a Kayak analysis, airfare for domestic destinations is down 13% this summer compared to last, and prices for foreign destinations are down 3%. For July 4 specifically, overall average airfare was down 17%. Hopper reports similar domestic discounts, including an 18% year-over-year drop in budget ticket prices for the period between July 3 and July 9. The booking app defines budget fares as ones that are lower than 90% of the fare quotes it tracks. For frugal foreign travelers, the news is similarly good, according to Hopper, including discount European fares that are averaging 13% below their 2019 level and discount prices to Canada that are averaging 27% less than last year. The cheapest tickets to Asia are also down 27% from last year's sky-high prices, though still up 40% from 2019. And budget flyers can get to Mexico for 6% less than last year. Airline capacity is a significant driver of both the record travel numbers and lower ticket prices. Even as airlines are frustrated by Boeing delivery delays and out-of-service Airbus A320neos while their Pratt & Whitney engines undergo lengthy inspections for metal fatigue, carriers globally have still increased capacity within and from the U.S. in July by 7.6% year over year, according to a Deutsche Bank Research analysis. Deutsche Bank measures capacity by the number of seat miles airlines fly. The total number of seats on offer from U.S. airports was also up 7% over the July 4 holiday weekend, according to Hopper. And A4A said that from June through August, U.S. carriers will offer an average of more than 26,000 scheduled flights per day, an increase of nearly 1,400 from last year.

Paring back forecasts

Berg said that later this month, when carriers report earnings, the public will see whether airlines were able to fill seats to an acceptable level during the June quarter, even with reduced fares. But some airlines have dialed back second-quarter forecasts. Southwest, already under pressure from activist investment firm Elliott Management, which acquired 11% of the company's stock, downgraded its revenue per seat mile forecast in a June 26 financial filing. And in late May, American reduced its margin guidance for the second quarter by 1 percentage point, citing, in part, a softer than anticipated revenue environment for domestic travel. In its late-June filing, Southwest said its revenue performance was being impacted by challenges in adapting its revenue management to booking patterns that remain dynamic. Berg said that on the Hopper app, flight shoppers are booking at the last minute more often than normal, which is a sign of consumer hesitancy. She expects airfares to remain low through the end of the year, including the holidays, though she also noted that the price discrepancy between premium airfare and budget tickets is on the rise. Airlines, meanwhile, having been paring back capacity plans for the current quarter, especially after summer school breaks come to an end, according to Deutsche Bank. As of July 1, U.S. airlines were scheduled to fly 3.9% more capacity in the September quarter than a year ago, down 0.4 points from a week earlier.