Increase in airfares halts as Delta variant spreads
Airplane Ticket

Increase in airfares halts as Delta variant spreads

Airfares are edging lower as international travel is increasingly being discouraged by the Centers for Disease Control and Prevention.

Why it matters: The Delta variant of COVID-19, is casting a shadow over the economic recovery. A dip in airfares that had been surging could be a signal that consumers may pull back in the months to come.

Driving the news: On Wednesday, Southwest Airlines announced bookings have decelerated and cancellations have picked up this month, which it said “are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant.”

State of play: While airplane tickets represent a relatively small component of what most Americans spend on, it’s been among the categories seeing the largest increases in recent months.

  • That’s because prices were unusually depressed a year ago. And supply has lagged demand as the economy reopened.

By the numbers: Airfares fell 0.1% month over month in July, according to the Consumer Price Index report out Wednesday.

  • This comes after a 2.7% jump in June and a 7% surge in May.
  • For context, prices are up 19% from July 2020 levels.

What they’re saying: “The recent degree of strength was unlikely to continue indefinitely, and today’s report suggests the slowing may be happening a bit quicker than expected,” TD Securities chief U.S. macro strategist Jim O’Sullivan tells Axios.

Yes, but: Edgerton also points out that airline fares are still about 10% below pre-pandemic levels.

  • As such, prices are likely to climb again, but at a more moderate pace, Oxford Economics chief U.S. financial economist Kathy Bostjancic tells Axios.

What to watch: It will be interesting to see if the Delta variant affects tourism-driven local economies and other parts of the travel industry, such as lodging, where prices spiked 6.8% in July.