Airfares in Canada on the rise as travel demand, jet fuel prices increase

SYDNEY, AUSTRALIA - APRIL 14: People queue on arrival at Sydney Domestic Airport ahead of the Easter long weekend on April 14, 2022 in Sydney, Australia. Thursday has been predicted to be the busiest day for domestic travel in two years, with 82,000 passengers set to pass through Sydney Airport today ahead of the Easter long weekend. (Photo by Lisa Maree Williams/Getty Images)
Canadian air fares are on the rise, new Statistics Canada data show. (Photo by Lisa Maree Williams/Getty Images)

Getting ready to book a long-awaited vacation? You may have to brace for higher prices.

Canadian airfares are on the rise, new Statistics Canada data show, as increased travel demand pushes airlines to hike fares.

Statistics Canada data released on Wednesday show that air transportation prices increased 8.3 per cent between February and March.

"Strong demand for domestic travel and trips to the United States during the March break contributed to higher prices this month," StatCan said.

Fare data provided by Cirium, an aviation data company, show that the average price of a one-way fare for flights within Canada in January this year shot up by 18 per cent compared to pre-pandemic levels.

Cirium data also shows that the price of a one-way ticket from Toronto to New York was up 41 per cent in January 2022 versus to pre-pandemic levels, while a one-way fare from Toronto to Fort Lauderdale increased 20 per cent for the same period. One-way ticket prices from Vancouver to Calgary rose 41 per cent in January 2022 from January 2019, while tickets from Toronto to Vancouver were up 17 per cent, and Toronto to Montreal flights roses 27 per cent.

Airlines around the world have boosted capacity in recent months as travel demand returns to levels not seen since the COVID-19 pandemic hit. Air Canada recently flew more than 100,000 passengers in one day for the first time since the pandemic, another sign that the airline's recovery is underway.

The increased demand, combined with higher jet fuel prices in the wake of Russia's invasion of Ukraine, is putting upward pressure on fares.

In a recent note to clients, National Bank Financial analyst Cameron Doerksen wrote that fares are on the rise for Air Canada and that hiking fares is an option for the airline as it grapples with surging jet fuel prices.

"Based on the lowest published one-week advanced fares, our indices (indexed to 2015) for Air Canada have shown some positive trends in recent weeks with fares generally higher than the same period in 2019," Doerksen wrote in the note last week.

"Given robust demand recovery, over time, we believe Air Canada will be able to offset higher jet fuel prices through higher fares."

Many airlines are offsetting increased fuel costs with higher fares. Bob Cummings, the new head of WestJet's ultra-low-cost subsidiary airline Swoop, says the ongoing spike in jet fuel prices will have to be passed on to passengers — at least in part — even as competition ramps up among discount carriers.

"We're always adjusting, almost real time, to those market forces when input costs go up. And they really do need to be passed through in order for the company to be financially healthy," Cummings said this week.

Glen Hauenstein, president of U.S.-based carrier Delta Air Lines, said on the company's quarterly conference call last week that the airline has not seen any backlash to the increased fares.

"We haven't seen a lot of resistance to the price points that we have in market, and our goal is to have reasonable price points in market up to the day of departure," Hauenstein said.

"My advice to travellers is to book early and be flexible if fares are your most important attribute."

With files from The Canadian Press

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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