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Will Americans venture from home this summer?

May 29, 2012

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The unofficial start of summer is upon us once again, and with it, the start of vacation season. According to The Conference Board consumer confidence survey, which includes questions about vacation plans, consumers are not really sure if they are going to take a vacation this summer. Overall, respondents’ plans to vacation in the next six months have fluctuated wildly in recent months; however, the number of those intending to travel by airplane for their vacation has trended higher than we’ve seen in years.

Americans are ready to fly again
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Meanwhile, petroleum-based energy prices have retreated from 2008 highs, but the price of jet fuel remains well above its historical average. The extent to which higher fuel prices feed into higher ticket prices could impact whether consumers head back to the skies.

Jet Fuel Kerosene - Type US Gulf Coast c/gal
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In the past year, the U.S. airline industry has coped well with rising fuel prices by flying leaner—and meaner. Across the board, airlines are flying with fewer planes and fewer available seats, but with increased ticket prices and added fees. The chart below shows how the passenger load factor, which is equivalent to capacity utilization for the industry, has risen steadily over the past 15 years.

Passenger load factors are at record highs
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Even if consumers are more inclined to take vacations, airlines need to take heed of changed consumer spending patterns. Consumers are now more cost-conscious and are looking for the best deals. New fees that add $100 for a carry-on or could charge families extra to sit together don’t fit this trend.

So the question is: How does the discomfort of flying combined with higher prices and fees gel with consumers’ renewed plans to fly this year? It may mean that the pent-up demand may remain pent-up for a while longer.

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