5 Secrets Behind Falling Airfares in 2023, And Why Business Class Is Now A Bargain

There have been a lot of stories about airfares going up. They’re the same stories about people owing more on credit cards than ever, and about the price of eggs. You have to adjust for inflation. While you may be paying more for an airline ticket, the real cost of air travel is down. Interestingly, business class fares to Europe are actually down even in nominal terms.

According to data from Cirium, the price of U.S. domestic airfares are up 9% versus 2019, while inflation is up 19%. That means tickets are cheaper in real terms. (Ticket prices in Europe are up more than in the United States, but still lag inflation.)

Moreover, the nominal cost of U.S. domestic fares fell 4% in the second half of 2023, as inflation moderated.

1. U.S. domestic airfares were $179.25 in 2023, up 9% over $163.63 in 2019, but substantially less than the 19% increase in CPI-derived inflation. Real airfares were lower in 2023 than they were before the pandemic.
2. Airfares fell year-over-year starting in August 2023, and were actually 9% lower in nominal terms in December 2023 than they were in December 2022. This is because inflation moderated and no longer buoyed airfares, which had already been falling in real terms.
3. In contrast, in Europe nominal airfares rose 8% in 2022, to a level 12% higher than in 2019. The same overall inflation adjustments need to be made, but consumer savings aren’t as stark.
4. Transatlantic coach fares were up 14% against 2019, still less than inflation. However the difference wasn’t as stark as with domestic fares, because transatlantic capacity was slower to recover from the pandemic than domestic capacity.
5. Interestingly, Cirium found that business class has actually gotten cheaper. I’d posit this as
   the result of premium leisure supplanting much business travel in the forward cabin.
   

   [T]ransatlantic business class airfare is 3% lower compared to 2019, with December 2023 business class fares 7% lower compared to December 2019. The average business class fare in 2023 was $1,845.

   Domestically, of course, first class can be cheaper than ever.

While there were spikes in airfare as demand patterns shifted during the pandemic and recovery, and airlines in many cases were slow to rebuild capacity as a result of shedding workers (despite government subsidies ostensibly meant for them not to do so), much of those spikes were either changes in relative prices (increases on some routes offset by decreases elsewhere), driven by inflation, or… transitory as capacity did eventually recover.

Boeing delivery days (and to a lesser extent, Airbus delays) could limit supply of seats, which holds the potential to reverse this trend.

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