Air travel markets
Just as cost pressures augur higher fares, market pressures may well be mainly in a downward direction:
- U.S. airlines are increasing their capacity across the Atlantic by some 5 to 6 percent this summer, and European airlines are also adding flights.
- But just about everybody expects an increasing squeeze on American consumers that is likely to lead to reduced demand.
- The make-or-break market for transatlantic airlines is business travel, not leisure travel, and if business travel softens along with the economy, those airlines will be in big trouble.
In classical economics, the answer to the combination of increased supply and decreased demand is lower prices. However, an important moderating factor is in play: Our weak dollar has made the U.S. a "bargain paradise" for Europeans. So far, the big transatlantic lines have apparently been able to offset weak U.S. demand with strong European demand.
On balance, I'd say that market forces favor lower fares, at least in sporadic promotional "sales," to bolster sagging load factors. But those sales will probably be more limited than in the past.
Where it ends
Clearly, you can read these tea leaves just about any way you want. I'd suggest doing it this way:
- Keep your eyes on fares—sign up for one or more of the fare-notification systems that several of the big online agencies offer.
- When you see a fare that looks reasonable, grab it. As the saying goes, "The perfect is the enemy of the good." Don't risk a big increase by trying to squeeze the last dollar out of your price.
- But if every fare you see looks stratospheric, wait it out, at least until a month or so before your departure.
- Keep in mind that even at increased levels, airfare is likely to be a relatively small portion of total trip cost. As before, it's the hotels and expensive restaurants that can kill you, not the airfare.