Airfare is down, but here’s why that may not last for long

Airfare fell 6.4% in January from a year earlier, the Labor Department said in its monthly consumer price index report on Tuesday. It might not last too long.

January is typically a slower month for travel as customers take fewer trips following the New Year’s holiday. Domestic travel usually picks up during school breaks and spring holidays.

The drop comes even though carriers are facing capacity constraints this year, in part because of an engine recall from Pratt & Whitney, congested airspace and delayed aircraft deliveries. Meanwhile, airline executives have forecast robust demand this year, even in the domestic market, which has faced more competition from international destinations that opened up in the wake of the pandemic. Those trends could help lift fares.

“The capacity decline is related to artificial constraints due to aircraft delivery delays and GTF engine issues,” TD Cowen airline analyst Helane Becker said in a note Friday. “These are not going away any time soon. Since demand remains above year ago levels, and above 2019 levels, we expect improvement in pricing.”

Airlines including Southwest and Alaska have moderated their capacity growth forecasts for the year. In 2023, airlines had been forced to discount flights, particularly in off-peak periods, after the industry added capacity.

Flight tracker Hopper said it expects “good deal” domestic fares — which it defines as the bottom 10th percentile of available fares — to average $276 in February. The company expects the average to rise to $302 in May, a more than 9% increase from its February forecast.

Delta CEO Ed Bastian said aircraft repairs and the parts supply chain are the biggest areas of the business that haven’t returned to pre-pandemic levels.

“All the suppliers in our industry lost a tremendous amount of experience due to the pandemic, and it’s taking time to get that back,” Bastian said on a Jan. 12…