Airlines are going premium. Prices are rising. Will cheap tickets be harder to find?
- The cost of airline tickets in the U.S. is expected to continue to increase in 2025 as budget airlines stumble and the industry’s major carriers press ahead with strategies focused around pricier, premium ticket options.
- No-frills airlines are built to have lower ticket prices than the major carriers, but rising operating costs and a crowded field of competitors have made that difficult to achieve.
In the midst of holiday shopping and travel, Colorado resident Tom Pipes didn’t want to spend extra money on a plane ticket. He flew from Colorado to Los Angeles on Southwest, the grandfather of budget-friendly airlines.
“If there was a first-class option, I wouldn’t use it,” Pipes said this week after arriving at Los Angeles International Airport. “I fly for the price.”
Unfortunately for Pipes and travelers like him, inexpensive tickets probably are going to become increasingly difficult to find.
Over the last year, the average cost of a domestic U.S. flight increased more than 4% to $269 in November, U.S. Bureau of Labor Statistics figures show. It is a trend that is expected to continue as budget airlines stumble because of rising costs and a crowded field of competitors, while major carriers press ahead with strategies focused on pricier, premium ticket options.
“You can expect to see pricing across the board firm up and move higher,” said Tom Fitzgerald, an industry analyst at TD Securities. “If you’re really price sensitive, there may not be as many deals for you.”
American, Delta and United are the world’s three largest airlines and are projected to account for 97% of the industry’s operating profit in the U.S. this year, according to a Deutsche Bank report. In an attempt to catch up, low-cost carriers are rolling out more expensive options for seats that come with perks such as early boarding and extra legroom, leaving less room on the plane for the lowest-priced tickets.
Spirit, which filed for Chapter 11 bankruptcy in November, rolled out its version of first class this year. Frontier will offer a first-class option in late 2025, and JetBlue announced this month that the airline will add first-class seats to domestic flights by 2026.
“Budget airlines are trying to find ways to boost their revenue, and they know that people are willing to pay more for a better product,” said Michael Linenberg, an airline equity researcher at Deutsche Bank. “The average price is going to be higher, and we may see a net reduction in seats that are allocated to the lower-fare price buckets.”
As budget airlines try to recast themselves, major airlines are catering more to higher-paying travelers with premium ticketing options, which is reducing the proportion of seats in the cheapest category, industry analysts said. United, for example, offers five tiers of tickets ranging from basic economy to first class, giving customers the option to pay more for a refundable ticket or a ticket that comes with free bags.
The price listed Thursday on United’s website for a basic economy ticket from Los Angeles to New York on Saturday, Jan. 4, was $347, which allows the traveler to carry on only one small item such as a purse. Of the nine flights from Los Angeles to New York that United operates that day, basic economy tickets were still available on only two.
For $50 more, a customer could select a seat and bring a carry-on bag, but they would have to shell out $55 more to get a fully refundable ticket. A premium economy seat on the same flight was priced at $724, and a first-class ticket cost $1,643.
Similarly, Delta offers main cabin tickets and “comfort plus” tickets, as well as an option above first class dubbed Delta One. While a first-class Delta ticket from Los Angeles to New York on Jan. 4 cost $1,059, a Delta One ticket was priced at $1,599 and comes with lie-flat seats. Spirit’s cheapest fare to New York from Los Angeles on Jan. 4 is $246, while its most expensive option is $416.
Sophy Chang, 32, recently flew Delta from New York to Los Angeles and chose the cheapest ticket option. Although her seat was toward the back of the plane, she said she was comfortable enough and grateful to be on a direct flight. She’s a regular Delta customer and said she typically has a good experience.
“I definitely wouldn’t mind extra legroom,” Chang said. “I care about it more on longer flights.”
Further widening the gap that has developed in the industry are conveniences and high-end perks offered by larger carriers that budget airlines can’t match. Low-cost carriers have fewer direct flights to fewer destinations and lack the luxurious airport lounges that other first-class travelers have access to.
Delta recently completed a renovation of its two terminals at Los Angeles International Airport, including the addition of a Delta One lounge with private check-in and fine dining options. By the end of the year, Delta plans to offer customers more than 700,000 square feet of lounge space across 56 Sky Clubs and three Delta One lounges.
“Demand for travel on Delta remains healthy with continued preference for our premium offerings,” said Delta President Glen Hauenstein during the company’s most recent earnings call. “Our new Delta One lounges in New York and L.A. with dedicated check-in and private TSA security truly differentiate Delta’s premium offering.”
So far this year, 57% of Delta’s revenue has been generated through sales other than main cabin tickets, Hauenstein said. The focus on higher-priced tickets reflects changes in consumer preferences, including a post-pandemic-lockdown shift toward spending on experiences over tangible goods, experts said.
“Since COVID-19, there are more people not wanting a miserable travel experience who are willing to pay more for a more comfortable journey,” Fitzgerald said. “It’s been an arms race for the airlines to offer more of a premium product.”
No-frills airlines that lack these perks are built to have lower ticket prices than the major carriers, but rising operating costs have made that difficult to achieve. Budget airlines need to pay the same prices for airport space, jet fuel and labor as the big players do, said Mike Boyd of Boyd Group International, an aviation consulting firm.
“The pilot flying for Frontier, he or she wants the same money that the American Airlines pilot is getting because they’re flying the same airplanes,” Boyd said.
Budget airlines are also struggling in part because there are too many of them, including six publicly traded carriers such as Allegiant and Sun Country, Deutsche Bank’s Linenberg said. The companies will have to consolidate in order to survive, leaving fewer ticket options for customers.
“Many of them are losing money because they’re all competing with each other for that same price-sensitive customer,” Linenberg said. “Part of the industry is going to restructure, and at the end of the day, the consumer will be facing higher fares.”
According to a Deloitte holiday travel survey, 49% of Americans plan to travel between Thanksgiving and mid-January. That number jumps to 66% among those with household incomes of $100,000 or higher, and falls to 34% among those who make $50,000 or less. Twenty-nine percent of travelers this holiday season will upgrade their airfare this year compared with the type of ticket they purchased last year.
There will always be a market for low-fare tickets, but prices may never return to pre-pandemic levels, according to Fitzgerald at TD Securities.
“There were good days of bargains that people were used to over the 2010s,” he said. “I don’t think those are coming back anytime soon.”
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