The Boeing 737 Max was grounded in March after two crashes in five months which killed 346 people. This has led airline prices to increase by 1.6 percent in August compared to a year prior, according to the U.S. Bureau of Labor Statistics Consumer Price Index.
There is an obvious connection between the groundings and the price increases. The grounding issue left airlines with “very tight capacity in the peak months and therefore an ability to push prices slightly higher with other airlines following that pattern,” said John Grant, senior analyst with airline analytics firm OAG.
In May, American Airlines and Southwest Airlines increased prices by $5 for one-way domestic flights. Delta, Alaska Airlines, and United did the same shortly after.
The industry is now awaiting the reaction from airlines once Boeing 737 Max’s are re-introduced to their lineups, but no one knows when that will be.
Southwest Airlines took the aircraft off of their schedule until January of 2020, while American Airlines is hoping it will be ready for the holiday season. They recently expanded their cancellation deadline to Dec. 3.
Southwest Chief Executive Gary Kelly mentioned in a memo that the company is beginning to work the plane back into their network.
“We are being thoughtful about that, and we have a solid plan in place and will be ready when the FAA releases an airworthiness directive that will unground the fleet,” Kelly wrote.
Southwest had 34 Max planes in its fleet in March and was supposed to have 68 in by the end of the year, Chief Financial Officer Tammy Romo said at an industry conference last week. American Airlines had 24 737 Max’s in March and was scheduled to start 2020 with 40 of the planes in its fleet, according to an investor update.
“Supply and demand logic suggests prices will fall,” said Nick Wyatt, head of R&A, Travel & Tourism at GlobalData.
Even through this debacle, airplanes are still one of the most popular modes of travel. 17.5 million passengers were estimated to take flight over Labor Day weekend, according to the U.S. Travel Association.
“There is a chance that travelers will have grown accustomed to the new higher prices and may even be factoring it in to their budgeting as a matter of course,” Wyatt said. “If airlines believe this has helped create a new norm, they will be unlikely to drop fares.”
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