According to Barry Biffle, CEO of Frontier Group Holdings Inc. (NASDAQ:ULCC), airfares could remain high for the foreseeable future because the forces driving up pricing aren't going away.
"Their input costs are going up. Unless that subsides, I can't see why fares would go down," Mr. Biffle stated while speaking at The Wall Street Journal's Future of Everything Festival.
The most recent data from the Bureau of Labor Statistics' Consumer Price Index shows that airline fares increased 18.6% in April compared to March, the fastest spike on record, WSJ wrote.
The surge comes as airlines face increased fuel and labor costs, which are their primary inputs. Prices for jet fuel have more than doubled over the last year, and wages are rising as airlines compete for scarce workers.
Airline executives stated that the rising pricing had not deterred passengers, and demand has continued to rise unabated. At the same time, airline capacity is constrained by slow aircraft deliveries and a shortage of pilots in the United States and worldwide—issues that could take years to resolve, according to Mr. Biffle.
Related: United States Faces Severe Pilot Shortage, Searches For Solution: CNBC
"The supply-and-demand imbalance, if you will, that's enabling much higher fares is probably going to be here for many years to come," he added.
Discount airlines like Frontier, which cater to budget-conscious leisure passengers, are also under pressure, but Mr. Biffle believes they still have a cost advantage over competitors. Mr. Biffle anticipates the United States to more closely resemble Europe in 10 to 20 years, where a group of airlines known as ultralow-cost carriers account for a larger share of travel.
Price Action: ULCC shares are trading higher by 1.75% at $9.89 during the premarket session on Wednesday.
photo via wikimedia Commons
