Despite surging air fares, airline demand remains on a solid trajectory that looks like the strong years of 2024 and 2025.
This resilience is consistent with our core economic forecast that the American economy would absorb the initial supply shock caused by the war.
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The economy continues to chug along with our forecast of 1.7% growth this year albeit with disruption to select industrial sectors amid higher inflation and lower household spending down market.
While there are risks should the price of oil and jet fuel jump sharply as inventories are drawn down, travel demand looks rock solid as the summer begins. In April, air fares increased by 21% year over year, according to the consumer price index.
U.S. air carriers have pulled back on growth plans as rising fuel costs are likely to result in fare gains that will fall short of the 20% to 30% needed to protect second-quarter profits, according to Bloomberg Intelligence. Seat growth in the second half of the year will be determined by fuel prices.
TSA checkpoint data through June 1 shows that air travel stands at 2.58 million, in line with the past two years through the same date and well above the post-pandemic low of 2.19 million in 2022.
