After holding steady in early 2017, airfares dropped in summer

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After stabilizing during the first several months of 2017, airfares once again declined over the summer when compared with prices from a year earlier.

However, it remains to be seen if that trend will continue after a recent bump in jet fuel prices and as consumers and the airline industry respond to capacity constraints in the Caribbean caused by hurricanes Irma and Maria.

"We are in a lull right now, but there are some interesting dynamics going on," said Patrick Surry, chief data analyst for Hopper, an app that tracks airfares for price-conscious travelers.

According to the Consumer Price Index (CPI), airfares were nearly flat on a year-over-year basis in February, March and April, before resuming the declines of recent years from May through August.

In March, for example, airfares were the same as they had been in March 2016. And in April, they were down just 0.6%. But prices were down year-over-year by at least 2.5% beginning in May, topping out at 4.3% in June. In August, the CPI showed airfare down 3.2% compared with a year earlier.

ARC shows a similar but more substantial shift during the summer months. From April through June, average round-trip, domestic ticket prices were up from the previous year, with April showing the largest increase at 4.1%, bringing the average cost to $501. But in July prices were down 3.2%, and in August they were off 2.1% year-over-year. ARC's data, which measures only tickets purchased through online, corporate and leisure travel agencies, tends to incorporate a slightly higher portion of business travelers than the CPI numbers, said Chuck Thackson, ARC's director of enterprise information.

Thackson said it's too soon to say whether the recent drop in year-over-year prices is being driven by larger market forces or is merely a short-term blip.

"Overall this year, average ticket prices have been basically the same as they were in 2016," he said. Beginning in late 2014, airfare dropped steadily until the brief uptick early this year.

The stabilizing of airfare in 2017 had been anticipated by industry analysts late last year as fuel prices ticked upward and with the major U.S. carriers slowing their rates of capacity growth.

After holding steady into April, jet fuel prices dove through late June. Since the week of July 7, however, North American jet fuel prices have jumped from $57 per barrel to $74 per barrel, according to IATA data obtained from the price-reporting service S&P Global Platts. The leap was fueled in part by the spate of recent Atlantic-basin hurricanes, especially Harvey, which had knocked out 16% of the U.S. refining capacity as of the end of August, less than a week after the storm.

As of Sept. 22, North American jet fuel prices were up 24.8% year over year, according to IATA.

Surry said that fuel prices as well as other impacts from the hurricanes could lead to pricier airline tickets in October than Hopper had originally projected. In September, consumers conducted fewer winter airfare searches for Florida and Caribbean destinations than is typically the case, he said.

"You can see it is correlated to the most impacted places," Surry said. "We are just coming to the run-up for people to book their Thanksgiving and Christmas trips. Are people just delaying, or is there going to be a bigger last-minute rush than usual?"

The heavy damage in destinations including Puerto Rico, Dominica, the U.S. Virgin Islands, Tortola, portions of the Florida Keys and St. Maarten/St. Martin could also drive up demand, and therefore prices, in Caribbean destinations that were spared, such as Jamaica and the Dominican Republic. Meanwhile, potential capacity restrictions at airports in St. Maarten, San Juan and the Virgin Islands could also play into pricing.

"You could see a convergence of factors that will lift prices up," Surry said.

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