The last decade and the changes have seen a remarkable phenomenon in the air transport market: airline revenues and profits have skyrocketed, but international flights have become cheaper than ever.
Years ago, it was rare to find cheap flights to Europe unless there were promotions or pricing errors.
But in recent years, cheap flights have become the norm. Even before the deployment of Basic Economy Class, flights from the United States to Europe, South America and Asia could consistently be in the few hundred dollars. And passengers could book flights to Asia, the Middle East and Africa for a bit more.
The lowest fares may not always be available on busiest travel days or during peak seasons and booking times, but it is always possible to find flights from the east coast of the United States to Paris, London , Amsterdam and more for around $ 300 or less. .
But finding the best prices can be tricky; there was not always a rule on when or by how long in advance they would be available. Some online media companies have emerged, offering newsletters, alerts, and summaries featuring the latest and greatest rates.
One of the best known of these is Scott’s Cheap Flights, a service founded in 2013 by former journalist Scott Keyes, after finding a cheap flight to Milan for under $ 150. Since then, Scott’s work has grown into a massive email subscription service with over two million members worldwide and over 30 employees.
This reporter has been a member of Scott’s Cheap Flights for years and has made several trips using the flights found on the platform.
But as the pandemic has decimated air route networks, virtually halted travel demand, and led airlines to downsize, it’s easy to wonder if the flight market will be recognizable once travel comes back in full force. .
We spoke with Keyes to get his take on how the airline ticket economy will change on the other side of the pandemic.
Cheap flights will increase in the coming months
In the near term, as airlines try to stimulate demand and various restrictions and closures are lifted, discounts, sales and specials are likely to be plentiful.
“Lowering fares is the biggest lever that airlines can use to try to attract travelers,” Keyes said in a telephone interview. “With advance bookings so far, they’ve already reduced flight fares in July and August, and around Christmas.
Travel demand has already started to pick up, albeit slowly and well below the levels airlines need to stop spending money. However, Keyes noted that with people still anxious to travel, airlines can use a combination of cheap fares with messages about the steps they are taking to help prevent the transmission of the coronavirus.
Offers and sales can be useful in attracting customers willing to hit the beach or a national park after months in quarantine, or people looking to visit friends and relatives. But they will likely have a bigger impact once cities and other destinations start to reopen in earnest. Ultimately, airline take-over and those up-front cheap fares are demand-driven.
“An airline can offer a $ 10 flight to a location in the United States, but that alone won’t induce demand,” Keyes said. “For most people it’s about whether they feel safe on a plane, how safe the destination is, what the restrictions look like there.”
“People have to feel safe going to a place before they want to leave their homes and go somewhere,” he added.
The cheapest fares in the world won’t be enough to bring demand back, Keyes said, unless there is actually something to be done at destination.
As the airlines have put some capacity back on the market, they seem to agree. American Airlines said it added flights for July based on where beaches and national parks were open – two recreation facilities that can theoretically operate while allowing social distancing – that an increasing number of customers have been looking for. his website.
The airline also said it plans to add flights to Florida when the theme parks reopen.
Longer term: why those $ 300 flights to Paris will come back.
Longer term, as demand picks up, airlines recover and the pandemic subsides, Keyes believes the cheap international fares travelers have grown accustomed to in the 2010s – like $ 300 roundtrip between New York and Paris – will return.
Supply and demand dynamics may be disrupted as COVID-19 testing expands, countries lift entry restrictions, and travelers with cabin fever leave quarantine and seek to travel to new. This is expected to stabilize as airlines return stored planes to service and demand gradually returns.
“There’s always a bit of chicken and egg with airlines and travelers,” Keyes said. “To what extent is demand driven” by availability and price, he added.
During and after airlines return to normal, these cheapest fares should continue to be available, he believes, in part thanks to new revenue models.
“The way airlines have generated revenue has shifted over the last ten or twenty years from a model where they mostly generate their money from the sale of economy class tickets, to a model where they generate the majority. of their money from other sources of income, ”he said.
This includes a focus on higher margin premium seats in First Class or Business Class and Premium Economy Class, up-sales such as baggage fees and extra legroom in the Economy cabin, and revenue from passengers. frequent flyer programs. These frequent flyer programs generate money through a number of channels, but primarily the sale of frequent flyer miles to airline credit card partners, who issue them in the form of spend rewards.
These credit card partnerships bring in billions of dollars each year for airlines – United recently mortgaged its frequent flyer program, valued at around $ 20 billion, for a cash loan.
In order to generate revenue, these loyalty programs need members to be engaged and loyal enough to the airline’s brand to spend on a co-branded rewards credit card. Making the cheapest seats on the plane accessible to more people with low fares is one of the many ways an airline can do it, Keyes said. This makes the lower margins that airlines earn on these cheap tickets more attractive.
“In a sense, all of these sources of income subsidize the cheap economy tickets,” he said. “That is why I expect this dynamic to continue once we have conquered the virus and travel begins to return to normal.”
A major caveat: the potential collapse of Norwegian Air
According to Keyes and other industry watchers, there is one possibility that could wreak havoc on the inexpensive trans-Atlantic flight market: a potential collapse of ultra-low cost carrier (ULCC) Norwegian Air.
After several high-profile ULCC bankruptcies in recent years, including Primera Air and Wow Air, Norwegian has remained the only major player in the space, with several small contenders such as Level and French Bee.
Norwegian has remained more financially viable and built a model that is a bit more sustainable than its failed competition, but the airline still operates on extremely tight margins, and the pandemic’s impact on international travel could prove devastating.
Norwegian Air shareholders recently approved a survival plan and the airline received a bailout from the Norwegian government. That, combined with drastic staff cuts, means the airline has some leeway while conditions improve.
Scott’s Cheap Flights generally does not alert subscribers to low fares on Norwegian, as these are commonplace; the service sticks to low rates on major carriers as part of its value proposition. But Keyes said the airline’s presence in the market is driving down the lowest prices of the biggest airlines.
“We owe a real debt of gratitude to airlines like Norwegian and Wow,” he said. “Even though we don’t fly them, they set a price for the cheap transatlantic fares you now see on full-service airlines” looking to compete, he said.
The same would be true if a major airline collapsed, according to Henry Harteveldt, travel industry analyst and consultant at Atmosphere Research.
Reduced competition and reduced price pressure from the low-cost airline could cause airlines to seek higher margins on cheaper coach seats.
“This is why airlines like Norwegian and Level are helping to make airline tickets more affordable on companies like British Airways or United,” said Harteveldt. “This price pressure on the industry is great for consumers.”