Airline fares to increase this summer
Airfares may be going up this summer. As a result of issues with the Boeing 737 Max, airfare is becoming more expensive.
With the grounding of the Boeing 737 Max jet, 371 planes were removed from service worldwide for an indefinite period of time.
Discount airlines like Southwest in the United States and Norwegian Air in Europe are among 737 Max’s largest customers. Those carriers put pressure on fares, forcing other airlines to offer more seats at lower prices to compete for leisure travelers. Then, fewer flights by discount carriers mean less competition for other carriers, and less incentive to offer lower-priced seats on their planes.
“I think it certainly has the ability to pressure fares higher as we get into the busy summer months,” said Helane Becker, airline analyst for Cowen.
Due to the grounded planes, hundreds of flights have had to be canceled each day until August. Late last week, Southwest canceled flights through August, and American Airlines, the world’s largest carrier, did the same on Sunday. United Airlines, the third US airline with a version of the 737 Max in its fleet, has canceled flights through early July.
For airlines, peak travel season comes during the summer. They put as many planes in service as they can, which means fewer extra planes will be available to fill in for the missing 737 Max jets.
“All the airlines have some extra planes at any period of time. But in the summer the system is strained more tightly,” said Philip Baggaley, the lead credit analyst for transportation companies for Standard & Poor’s. It’s tough to disentangle the impact of the 737 Max from the other factors.”
While Europe doesn’t have as strong an economy as the United States, a number of budget airlines have gone out of business in the last six months, including Wow Air, Primera Air and FlyBMI. Less competition allows for other carries to increase their prices.
Last month, after a 737 Max jet flown by Ethiopian Airlines pilots crashed in that country, killing everyone aboard, all of Boeing’s Max planes were grounded worldwide. It was the second fatal crash involving a Max in recent months after a Lion Air flight crashed in October.
It is believed that crashes are tied to an automatic safety feature of the new jet that forced its nose down.
Boeing is unsure when it will receive approval for a software fix meant to address the problem.