A Turndown in Transcon Fares: Permanent or Passing?

Recently, I’ve mentioned the great deals on transatlantic flights that I’ve gotten to a few different people. Almost every time, people say “(the deal you got going to Europe) is cheaper than going to California.”

While I’ve heard those various replies, it wasn’t until recently that I started to think about what they were saying. After all, transcontinental flights have historically run well in excess of $300 round trip, particularly those to California.

Just out of curiosity, I decided to take a look at flights between Boston and Los Angeles, which has generally run cheaper than places like San Francisco, Portland, OR, or Seattle. I was quite surprised to find a number of flights not only well under $300, but closer to the $250 range.

Factors at Play

So what has spurred this recent downturn in fares?

There are a number of different things that spur these types of trends, but one of them seems to be the recent introduction of basic economy classes with American legacy carriers like American Airlines, Delta Air Lines, and United Airlines.

Though I wrote a piece about the emergence of these fare classes (a year ago to the day!), particularly United’s, one of the major goals of these programs isn’t to “give consumers choice,” as airlines would like you to believe. Rather, it’s to encourage people to pay more to get the same service that they received before.

Perhaps, then, the downturn in transcontinental fares can partly be attributed to the introduction of basic economy classes. However, it’s not just American, Delta, and United who are selling sub-$300 round trips on transcons: jetBlue and Virgin America have both slashed their prices to the point where even flights less than a month out are running in that price range.

b6-fare-bos-lax
A trip from December 6 to December 10 would cost $237, which is well below traditional norms.

This is particularly surprising, as jetBlue and Virgin America have been known to have economy transcon products that are superior to the aforementioned American legacy carriers. Moreover, neither has implemented a basic economy class (derisively called “economy minus”), so you’d think that they would still be able to charge a (relative) premium.

Looking Ahead

While these recent developments are certainly good for the average traveler looking to escape to the West Coast, this isn’t to say that transcontinental fares will stay low permanently. Additionally, while international flights are (generally) further in distance and have their own unique requirements that can drive prices up comparable to domestic flights, and while the U.S. domestic airspace already contains budget airlines like Spirit and Frontier, the arrival of carriers like Norwegian Air Shuttle and WOW Air have certainly put downward pressure on a number of transatlantic markets. As a result, any fluctuation could well put these transcon fares back above the routes they’re currently cheaper than.

Moreover, fares are not made to be identical or stagnant, as, for example, a market with less competition and a high number of business travelers is likely to have a higher base fare at any given time. After all, from a business standpoint, why charge less when people will pay more? Airlines are businesses, and businesses aim to maximize profits, so they’ll do their best to get the maximum “willingness to pay” out of their customers. If that willingness is “up” in a certain place, it’s reasonable to assume that the prices will adjust accordingly.

Despite all the pessimism in the preceding two paragraphs, there’s certainly much to be optimistic about. With the ever-increasing affordability of air travel, particularly to destinations far away, the American public can continue to look forward to newfound travel opportunities both near and far.