What's going on with airline prices? Well, just about everything, according to Cowen Senior Research Analyst Helane Becker.
"Costs are going up and fares are going up — that's the bottom line," Becker said on Yahoo Finance Live (video above).
Last quarter, the average domestic airline ticket cost $327.13 in the U.S., according to the Bureau of Transportation Statistics. However, executives from two of the biggest airlines — Delta (DAL) and United (UAL) — warned that these prices would be climbing only higher over the next few months to offset the rise in oil prices and rebound in travel demand.
Both inflation and the Russia-Ukraine war have caused oil prices to skyrocket over the past few months, which has put further pressure on airlines, especially ones that fuel up in areas where prices are particularly high.
For example, Becker said, "JetBlue gets a significant percentage of its jet fuel in this market, 80% of their flights or their whereabouts touch New York and Boston."
The price of New York Harbor jet fuel has more than doubled in the recent weeks. Its Northeast region, which also includes New Jersey, Pennsylvania, and Virginia, is currently averaging $7.46 per barrel of jet fuel, the same price as in Alaska. New England is averaging $7.61 per jet fuel barrel, while the Western Pacific region is at an average of $6.77 per barrel. Nearly every region is about $6 per barrel of jet fuel, according to GlobalAir.
Becker is expecting these prices to only keep rising, at least for the foreseeable future.
"We think airfares are going up on average about 7% a month for the next three or four months," she said. "Then, of course, on the other side is the consumer with not only airfare going up, but everything is going up. We have this huge inflationary problem in the United States with gasoline in the pump going up, with food inflation, rent, and so on."
The most damaging effect that could arise out of this inflationary issue is demand destruction, which could set airlines back after finally starting down the road of recovery following the height of the coronavirus pandemic.
If that were to happen, Becker said, "Then we'll start to see the higher fares impact demand as we go into the fall."
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv
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