Ehren Minkema flew home to Minneapolis for Christmas last year. The round trip from Austin cost him $424. About a week ago he booked almost the same flights for this year. The price was $722. He's 35, and he's now rethinking his holiday budget, gifts included.
He isn't alone. Hopper, a travel-booking company, says holiday fares are the highest in at least ten years. The average domestic round trip for Thanksgiving costs 31% more than last year. A Christmas ticket costs 23% more. The Journal's Rebecca Cadenhead and Alison Sider told his story on Monday, Oct. 19.
Jet fuel is the reason the airlines give. Its average monthly spot price sits around $4.50 a gallon, up 91% since February, by Argus data. Carriers expect their fuel bill to run far higher than last year's. They've passed some of that on to you. The airfare part of the consumer-price index hit a record in September. It rose 1.2% from August and 22.4% from a year earlier. United (UAL) and Delta (DAL) each raised domestic fares $10 each way, JPMorgan analysts say.
The airlines think you'll pay
Delta's chief executive, Ed Bastian, told analysts this month that the top 40% of U.S. households make up most of Delta's customers. They're wealthier than a few years ago, he said, and willing to absorb a fare increase. Alaska Airlines (ALK) expects demand to hold if the economy does. Hopper's economist, Hayley Berg, doesn't think the loss of budget lines like Spirit explains much. There's still plenty of competition, she said.
The chart is the useful part. Hopper priced the same Thanksgiving trip by the day you fly home. Come back Sunday, Nov. 29, and the average round trip is $604. Come back Wednesday, Dec. 2, and it's $342. Even Friday, Nov. 27, the day after the holiday, runs $419. Kayak's chief, Peer Bueller, says past years were cheapest when you booked three to five weeks ahead. Berg adds that many people can't pick the cheapest day, because they see the trip home as essential.
Our read
This is a Cash Flow story (M5). Fuel went up, and the bill landed on the traveler within months. That's how a price shock works. It doesn't ask. Airlines have told their investors, out loud, that their customers can take it. In the model books, United (UAL) is held at weight in 3 books; nothing added. Delta and Alaska aren't held. We read the fares as a line in a family budget, and that line just got bigger.
Here's the check for this week. Open the holiday travel line in your budget, or write one if it doesn't exist. Price your own trip on two or three return days before you buy anything. Hopper's gap between the Sunday and the Wednesday is more than $250 on one ticket, and a family of four flies four tickets. Put the return day on the calendar first, then shop for the gift. If the number still doesn't fit, trim the gift list before you touch the emergency fund. The umbrella is cheaper on a sunny day, and so is the flight home.