Third-quarter airfares will increase year over year throughout the world and particularly in Europe due to persistently high jet fuel costs and carriers' decisions to constrain capacity in come markets, according to a new analysis by travel consultancy Advito.
According to Advito, third-quarter airfares on average on international and domestic routes alike are set to rise from 2025 levels in all regions of the world in business and economy class.
The increases are perhaps most acute in Europe, where business-class international and domestic fares each are projected to increase 9 percent year over year, each at least matching the highest of any region. Advito projects average business-class and economy-class fares on European domestic routes to increase 14 percent and 10 percent, respectively, by far the highest of any region.
"European airlines are facing sustained and ongoing cost pressure," according to Advito. "While many carriers have mitigated fuel price increases, these buffers are now rolling off, forcing airlines to pass higher costs to consumers."
The report noted some carriers' decision to remove short-haul inventory, including Lufthansa's decision this year to cut 20,000 short-haul flights. "This is impacting major hubs such as Frankfurt and Munich and contributing to higher fares," according to Advito, which also cited fare hikes by European low-cost carriers and government-imposed sustainable aviation fuel requirements as key factors in the higher average fares.
In North America, Advito projects Q3 international business-class fares to increase 5 percent year over year, while international economy-class fares increase 1 percent, and business-class and economy domestic fares increase 2 percent and 1 percent respectively.
"Limited fuel hedging is leaving carriers exposed to rising fuel prices, with costs increasingly passed on to passengers, sustaining higher fares particularly on routes to Europe and Asia," according to Advito.
Advito said it uses predictive analytics to produce airfare calculations based on fare availability for the third quarter in global distribution systems, using May searches.
Meanwhile, Q3 hotel pricing "reflects a more complex and uneven landscape, with inflationary pressure continuing but increasingly concentrated in specific regions and markets," according to the report.
Unlike Advito's air price forecast, projected hotel pricing ranges from year-over-year drops of 6.1 percent in the Middle East and 2.5 percent to increases of 12.6 percent in Latin America and 5.9 percent in North America. The average daily rate in the United States is projected to increase 5.8 percent.
"In the U.S., conventions, group activity, and urban compression are sustaining pricing in key markets," according to Advito. "This creates a more segmented environment requiring more targeted sourcing and tighter market-level strategy."
Advito said its hotel projections were based on predictive analytics around flexible best available rates available in GDSs and online travel agencies in the third quarter.
Advito projects third-quarter U.S. car rental rates in the United States to increase 1 percent year over year, " as fleet availability recovers post-Covid, though SUV rates stay elevated due to strong demand."
World Cup Update
The FIFA World Cup soccer tournament is in full swing in the U.S., Canada and Mexico, and Advito suggested suppliers' early forecasts of strong demand were overestimated, thanks in part to tighter U.S. entry requirements, with hotel rates declining after FIFA reduced room blocks.
"Pricing volatility will also depend on team performance," Advito noted, "with strong runs from teams with large fan bases, such as Argentina or Mexico, driving demand spikes in the U.S., particularly during the final stages."