: What will happen to airfares in 2021?

With coronavirus cases still setting records across the country and overseas, most people are hesitant to travel right now — if not banned from doing so altogether, depending on the location. But as the vaccine is rolled out, that could change.

“The vaccine rollout is critical to airlines,” said Edward
Russell, an airlines reporter with travel-news outlet Skift. “Executives at
most major airlines have said they do not expect a significant recovery in air
travel until the vaccine is widely available.”

And there’s evidence that some people are so optimistic about the prospects of future travel and the vaccine that they’re already booking spring and summer travel. United Airlines
UAL,
+3.23%,
for instance, reported last month that its bookings for the third quarter of 2021 are only down 40%, compared with the 70% decline in bookings in December and January.

“While it will take time for the vaccine to be widely distributed, the Company’s confidence is even stronger in the recovery and the trajectory of the rebound in 2021 and beyond,” United said in a regulatory filing.

So how will this expected resurgence affect the cost of air
travel, now and in the months ahead? Here’s what the experts had to say:

Air travel is much cheaper these days — for most destinations

While travel experts’ assessments differ as to how much
airfares have fallen over the course of the pandemic, the consensus is that the
cost to travel the skies is down.

Overall last year, the “good-deal” price on round-trip domestic flights in the U.S. was $220, which was 25% lower than in 2019, said Adit Damodaran, economist at travel website Hopper. “In the wake of the Covid-19 pandemic in Spring 2020, roundtrip airfare dropped around $60 with lower travel demand,” Damodaran said. “Similar to past years, we saw price increase into the summer, fall during the autumn shoulder season, and rise again into the holidays.”

Indeed, an analysis from Cowen & Co. found that airfares on some domestic routes were up 1.2% for the week of Dec. 28. Price fluctuations have become more rare as the pandemic has worn on. “Since the early days of the pandemic, pricing has stabilized to a degree as airlines have cut capacity,” Russell said.

In the face of low demand, airlines have cut the number of flights they operate and have grounded aircraft. The reduced supply of seats available for purchase, as a result, has helped buoy prices.

It’s a different scenario, though, when it comes to international flights. “Airfares to Europe, Africa, and Asia have generally been higher than pre-pandemic levels,” said Willis Orlando, member operations specialist at travel website Scott’s Cheap Flights. From time to time deals on international flights from major U.S. cities to European hubs like Paris and Barcelona on budget airlines have cropped up, Orlando added, but the widespread deals that occurred relatively frequently pre-pandemic “have been super rare.”

Flights to international locations remain more expensive in part because of the myriad restrictions on travel that governments have imposed to curb the spread of COVID-19.

Airfare will get more expensive later this year

Travel experts predict that the cost to travel by air will
increase throughout 2021 as the pandemic subsides. Hopper, for instance,
expects airfare prices to rise on average by 6% each month starting in March
before leveling off in the summer.

The reduced capacity at airlines right now will contribute to rising prices. Even though airlines are seeing much higher demand already for travel this year than they did last year, they won’t be quick to add more itineraries. Most airlines have relaxed their cancellation policies, in many cases offering customers vouchers if they choose to forgo a trip because of concerns related to the pandemic. So bookings made now may not still be around come this summer if COVID-19 cases remain elevated.

“With no cancellation penalties there is uncertainty whether these bookings will stay if the vaccine rollout does not proceed as fast as hoped,” Russell said.

Consequently, travelers will be competing for fewer seats on flights for some time to come. Another unknown factor: The large number of people who received vouchers for canceled travel in 2020. Most airlines distributed vouchers to travelers who proactively canceled trips last year — but in many cases, those vouchers came with expiration dates. Depending on how many flights are available and how many people cash in those vouchers, prices could be driven higher at some airlines.

Domestic air travel — as well as travel to nearby international locations such as Canada and Mexico — is expected to come back sooner than more far-flung destinations.

“We’re not to the point yet where we feel confident publishing
nonrefundable fare deals to places like Europe or Japan that are currently
closed to American travelers,” said Daniel Burnham, senior member operations
specialist at Scott’s Cheap Flights. “It’s certainly possible the public health
situation will have improved by June or July and that these popular
destinations will relax their immigration requirements, but we’re still making
sure that we can conveniently change or cancel our summer plans just in case.”

That said, airlines may have some incentive to keep airfare
affordable in order to induce further demand if the interest cools after the
initial wave of bookings seen right now.

If you’re booking a trip, read the fine print

Virtually all airlines have relaxed their typical cancellation policies in response to the pandemic. Nevertheless, these policies do differ from airline to airline.

While booking a trip might be helpful to give people
something to look forward to, consumers should be careful about choosing an
airline that fits their needs, should they ultimately decide they’re not ready
to travel yet.

“There are slight differences from carrier to carrier, and policies keep changing as the pandemic drags on,” said Sara Rathner, travel and credit card expert at personal-finance website NerdWallet. “And if you book travel through a third-party site, you’ll be subject to their policies and not the airline’s.”