Sky-high airfares could moderate as demand normalises, more capacity is added, say experts

Singapore

AIRFARES have soared amid strong pent-up demand and re-opening of major South-east Asian economies but industry experts expect prices to eventually stabilise as airlines add more capacity and demand normalises.

A combination of factors - booming travel, limited availability of seats, higher fuel costs and easing of travel restrictions - have pushed airfares higher, with flights to popular destinations costing more than pre-pandemic levels.

This contrasts sharply with the super-low fares that were offered by airlines at the peak of the pandemic when travel curbs were in place, said Assistant Professor Terence Fan from the Singapore Management University, who specialises in travel.

"Travellers are therefore seeing a double whammy in price hikes," he said.

For example, a business-class return trip from London to Singapore through a European city connection could have been "as low as S$3,500" prior to the pandemic. "Now, this is easily S$4,100, and often at least S$5,000," he noted.

But this varies depending on the routes, travel dates and classes and the airlines, said Prof Fan adding that fares in the economy class tend to vary less.

A mid-week return trip for economy class flights from London to Singapore with a transit in a European city - if travellers are lucky enough to snag the seats, that is - could cost around S$1,000-S$1,500 or S$2,000 for direct flights, which are more or less comparable to pre-pandemic pricing, he elaborated.

After a two-year lull owing to the pandemic, business-class travel has shot back to life. Accordingly, their fares have seen a sharp uptick of around 20 per cent higher than pre-pandemic levels, said Steven Ler, executive director of UOB Travel Planners. He attributed this to limited seats in the front-cabin classes.

On the other hand, in the back cabin, economy seats have seen lower price hikes of 5 to 10 per cent, he continued.

Airfares for outbound travellers from Singapore has inched up across the board - and sharply at that.

Lavinia Rajaram, Expedia Group's Asia head of public relations, said the group has observed that prices are up 50 to 70 per cent for flights out of Singapore on all routes compared with the levels in the first quarter of 2022.

This followed increased searches for outbound flights when Singapore took a major step last month to restore air connectivity through a vaccinated travel framework, which no longer required travellers to take only designated flights to enter the city state quarantine free, among others.

While unleashed "pent-up" travel demand is a key factor for the surge in airfares, Rajaram also attributed the price increase to seasonality, as travel tends to pick up during public holidays, especially when they involve long weekends, and the June school holidays.

"Searches for outbound flights for the Labour Day long weekend (in May) and the June holidays grew by 140 per cent and 80 per cent respectively," she said.

Sabre Corp, a travel tech firm, has seen a general 5 to 25 per cent increase in airfares from pre-pandemic times.

Rakesh Narayanan, Sabre's AsiaPacific vice-president and regional general manager of travel solutions (airline sales), explained that the extent of the airfare increases hinge on several factors including the airline and geographical area, as the challenges in the travel sector have impacted them differently.

In addition, he pointed out that some airlines may also be facing staffing woes in trying to cope with rising demand after having downsized during the pandemic.

Soaring jet fuel prices since Russia's invasion of Ukraine is also a key driver for rising fares. Airlines tend to pass on the higher fuel expenses (fuel is a key operating cost component) by hiking fares.

In addition, some European airlines are also hit by an uptick in operating costs as they have to fly a more "circuitous" route to avoid Ukraine and Russia, Prof Fan remarked.

Meanwhile, the trend of airfares being further segmented within the various classes, which started before the pandemic, is getting more prevalent. Narayanan said that the trend had accelerated during the pandemic as travellers were eager to personalise their journeys.

For example, Emirates, Qatar Airways and Finnair offer a "no-frills" version of business class that does not come with lounge access or even checked-in baggage.

However, experts do not expect travel fares to stay elevated for long.

Sabre's Narayanan observed that the suspension of regular international flights during the pandemic had made international travel expensive under "limited bubble arrangements".

"However, rising prices could be offset as airlines are now able to operate more routes and therefore become more profitable. Over time, as airlines bring back more capacity faster than demand increases, fares are likely to moderate," he said.

Expedia's Rajaram also reckons that high fares may be a short-term phenomenon and travel costs could stabilise over time as more capacity is added and regional airports start to operate at full capacity.

The business-travel segment is one to watch as the current travel boom is significantly led by corporate travellers. These travellers tend to snap up the more limited business class and premium economy seats, said Ler.

High fares or not, the travel bug is hard to resist after enduring prolonged curbs and affordable rates may not be all that elusive. Travellers can save by being flexible about destinations, or opting to book supplementary activities together with tickets in a single package, said Narayanan.

Focus on the final price right down to baggage fees, advised Prof Fan.

The day of the flight booking also matters to reap savings, said Rajaram. According to Expedia and Airlines Reporting Corporation's travel booking guide for 2022, Sunday is the cheapest day to book flights, as tickets are close to 20 per cent cheaper than Friday - the most expensive day.

UOB Travel's Ler recommends travellers book at least 6 to 9 months in advance, as flight prices can fluctuate very quickly as the take-off date nears.

For example, travelling to Kuala Lumpur by economy class about 2 months before the travel date could be priced around the "mid-200s", but surge to around S$350 about 2 to 3 weeks before the flight, he said.