The airline industry is still trying to fully recover from the pandemic, but it's happening in fits and starts. While United Airlines says searches for international travel have increased after one final COVID restriction was lifted, fares are still rising past 2019 levels and bookings are falling on a monthly basis. Where does the sector go from here as we enter the busy summer travel season? Vivek Pandya, lead analyst at Adobe Digital Insights, joins Closing Bell to discuss airline customer behavior, how demand could ebb and flow, and more.

Closing Bell

Where Does the Airline Sector Go From Here? Report Shows Bookings Slump in May

Okay, well, we're taking a look at the airline industry and some key covid restrictions are lifted and consumer spending habits shift as inflation lingers. The US will no longer require a negative covid test for international travelers, something that industry lobbyists have been fighting for over the past year. And meanwhile a report showing that airline bookings actually slipped again last month, marking the second consecutive monthly drop this year as fares soar way past pre pandemic levels. I mean double digits compared to what they were pre pandemic. So what can the industry expect as this busy summer travel season starts? Well, joining me now is Avec pina lead analyst at Adobe digital insights, which publishes research on digital marketing and other consumer topics. Vivek thanks so much for coming on. So what are your key findings from this report? Thanks very much for having me Kristen. So as we've been looking at how the data is really shifting as inflation affects a lot of different sectors. We've been looking at flight prices and we're finding they've ticked up once again in May about 6.2% Then in the midst of that price increase, we've seen bookings drop about 2.3%. So all that's to say there's still a heavy level of demand in terms of booking and stable volume. But when we think about how prices are increasing month to month, just compared to January, they're up 47%. We're starting to see some of that momentum to travel get curbed and consumers maybe reorienting reorienting their plan to try to manage how they can handle these types of prices. Okay, so of course, we know higher prices across the board, especially gas prices, fuel costs absolutely through the roof. But what is the best way to kind of manage manage this if you are a consumer, are there any ways to win or at least be strategic in this scenario? It's it's a good question that a lot of consumers are thinking about and experimenting with. One of the things that they are really kind of taking seriously is is shifting their plans around these sort of major national holidays. You think about memorial day weekend? We have July four coming up. Uh, moving travel plans further away from those types of peak periods can offer some price flexibility, but again, in an inflationary environment like this, they're having to just eat and absorb some of those costs. And many consumers have been willing to, because we've been through about two years where, where travelers have been a little cooped up because of the pandemic and we kind of came into this year with a lot of enthusiasm and desire on the part of the traveler to get out there and, and but but once these prices get to this level, the flexibility gets much more limited. Well, and I think we would be remiss here not to mention the other factors, of course waiting on travel that's staffing shortages, higher wages for workers, better pay packages in addition to fuel prices and then just simply scheduling, right? I mean, when there's a lack of workers on top of that, um, inclement weather, it's hard to actually kind of keep this travel schedule running cohesively. And so what are all of the issues Vivek leading to this even beyond just those higher fuel costs. So when we think about the sort of surging levels of demand in the face of some of the factors that you mentioned, the fuel prices, the labor shortages, it's really been tricky for consumers to kind of gauge how these things could shift day to day. So we're seeing booking windows increase and they're, they're thinking a lot further into the future to kind of gain potential pricing flexibility, but also be able to hedge against some of these challenges and these factors. Um, ultimately there's the pandemic has been governing a lot of travel over the past couple of years and now people have kind of felt more comfortable booking travel with that still being something that people are having to contend with. But these bigger issues that you mentioned, the fuel prices, they're likely going to continue to dictate behaviors around how they travel and when they travel. So what's your expectation throughout the summer of event, you think demand starts to cool a bit, but that's also coupled right with these testing requirements for international flights. Now going away, It's, it's, it's a great prospect for consumers to kind of think about international travel because they're just now getting into this this realm where they're getting a lot more comfortable with domestic travel. We're seeing domestic travel up still a good margin over where we would see it in 2019 or pre pandemic levels. So when we when they're thinking about international travel and domestic travel, it's really just gonna be about price. They they have a lot of demand and a lot of curiosity. They're looking to reorient their budgets to accommodate travel. But when prices are, you know, 30% above pre pandemic, still 47% from the start of the year, they're looking to try to see how their budgets can manage these pricing pressures that extend beyond just the travel space they're looking towards. Alright Vivek Pena, lead analyst at adobe digital insights Quebec. Thanks so much for coming on the show.