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Airline ticket prices fall 19 per cent amid less demand, more flights

Seat capacity among big Canadian carriers has rebounded to 92 per cent of 2019 level
Statistics Canada says airfares have plummetted over the past year, as airlines shore up capacity even while consumers think twice about travel amid a higher cost of living. An Air Canada jet taxis at the airport, in Vancouver, B.C., Wednesday, Nov. 15, 2023. THE CANADIAN PRESS/Adrian Wyld

Statistics Canada says airfares have plummeted over the past year, as airlines shore up capacity even while consumers think twice about travelling in a world of higher costs.

In its consumer price index (CPI) Tuesday, the agency said the price of air transportation dropped 19.4 per cent last month compared with October 2022.

The figure follows a roughly 21 per cent year-over-year drop in September and a 20 per cent decrease in August, after rampant post-pandemic demand last year outstripped carriers’ capacity to meet it, resulting in sky-high fares.

The data also showed airfares declined four per cent on a monthly basis in October, when they typically rise ahead of the holiday season.

The travel sector continued to roar back this year, with seat capacity among big Canadian carriers at 92 per cent of 2019 levels, according to figures from aviation data firm Cirium.

But experts say customers are now curtailing travel plans in response to strained purse strings and nearly two years of high inflation, even as airlines ramp up flight volumes and try to lure Canadians back on board with lower prices.

TD Cowen analyst Helane Becker said there’s “too much capacity” in some markets, including sun destinations and major routes between big cities.

Though bookings are up for American Thanksgiving, Christmas and New Year’s, they’re worse than expected for off-peak periods as consumers scale back.

Observers have cited less disposable income amid increased costs on everything from rent and mortgages to food, gas and student loans.

“We are in a period of a general domestic slowdown. And I think I would point directly at this whole inflationary situation,” said aviation consultant Rick Erickson, even as the overall inflation rate slowed to 3.1 per cent last month.

“Travel tends to be one of the very first elements that gets cut. It’s discretionary.”

Nonetheless, ticket prices last month hovered 4.6 per cent higher than pre-COVID-19 levels.

“While September CPI data shows that airfares in Canada overall have normalized from an exceptionally strong 2022, pricing remains above pre-pandemic levels despite the current economic uncertainty,” said National Bank analyst Cameron Doerksen in a note to investors.

“We also note that the index is weighted more to domestic flights, and we believe there is more downward pressure on fares domestically due to increased competition.”

That competition is especially fierce on flights bound for sun-splashed spots and on major corridors such as Vancouver-Toronto and Calgary-Vancouver — generating lower fares — but often softer on regional routes. Air Canada has reduced its regional presence since 2019, and WestJet has largely withdrawn from short trips in Central and Eastern Canada, resulting in fewer competitors and flight options.

Flights across the Atlantic and Pacific Oceans also still come at a premium as flight volumes continue to catch up with demand, analysts say.

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