Why Air Travel Never Returned to Normal

If you've booked a flight recently, you've probably asked yourself the same question:

Why are flights still so expensive?

After all, the COVID-19 pandemic ended years ago. But airplanes are full, airports are crowded and for the most part, travel has returned to pre-pandemic levels.

But, shouldn't prices have returned to normal too?

The problem is that air travel didn't return to normal.

It evolved into something entirely different. And understanding what changed helps explain everything from rising ticket prices to the explosion of premium cabins.

When the pandemic shut down global travel in 2020, airlines experienced one of the worst financial crises in their history. International borders closed, passenger demand collapsed altogether and business travel disappeared almost overnight.

For a brief moment, it appeared the airline industry might fundamentally change with how the pandemic evolved and uncertainty loomed overhead.

Then something unexpected happened…travel returned faster than anyone anticipated. Not only did travelers come back, but many returned with a new mindset:

They wanted experiences.

After years of restrictions, canceled vacations, and uncertainty, consumers became willing to spend significantly more on travel than they had before.

The result was a phenomenon often referred to as:

"Revenge Travel."

One of the biggest misconceptions about airline pricing is that airlines can simply add more flights whenever demand increases.

But here’s the reality…they can't. Airlines faced several constraints coming out the pandemic such as:

And as a result, this created a simple economic problem:

Demand recovered faster than supply.

And you may have learned in ECON-101, when demand exceeds supply, prices rise. For those that aren’t aware, below is a relative comparison of how supply (e.g. number of flights, seats, etc.) impacts price. As we came out of the backend of COVID-19, travel was not expected to surge as much as it did, but as discussed earlier, revenge-travel caused a spike in travel and with limited supply, prices subsequently rose.

Perhaps the biggest surprise of the post-pandemic era wasn't that travelers returned, but how they returned. Travelers didn't just buy economy tickets.

They purchased:

Airlines quickly realized something important:

Many travelers were willing to pay substantially more for comfort, flexibility, and convenience.

As a result, airlines began shifting their business models. Delta for example, is investing $1B in cabin upgrades, mainly focused on their premium cabins, while United is focused on expanding its business class offerings and even began introducing the United Polaris Studio on select routes.

This sounds counterintuitive, but airlines increasingly care less about maximizing passenger volume and more about maximizing revenue per passenger.

Imagine these two scenarios with the same exact aircraft on the same exact route:

From an airline's perspective, fewer passengers can actually be more profitable. Even though there are 100 less passengers, the $200 difference in fare, which could likely be attributed to premium cabins, not only offset the difference, but exceed the total flight revenue.

This is one reason airlines continue to expand:

They're not selling transportation…they're selling differentiated experiences.

Before the pandemic, business travelers represented a disproportionately large share of airline profits. And while leisure travel recovered quickly, traditional corporate travel remains below pre-pandemic levels.

At first, this worried airlines, but at the same time, with revenge-travel spiking as strongly as it did, they discovered something unexpected:

Leisure travelers were increasingly willing to pay premium prices themselves.

Many travelers compare today's prices to what they remember paying in 2019. And while there is validity to anchor to prices paid pre-pandemic, several factors have changed:

And arguably, the most important piece:

Travelers demonstrated they were willing to pay more.

As such, these markets tend to preserve higher prices when demand supports them. This goes back to the original ideology of price equilibrium and that price stickiness will continue as these travelers continue to pay higher prices while traveling.

The old assumption that airfare would eventually return to "normal" pricing may have been incorrect. Instead, we may have entered a new era where:

In other words, the post-pandemic travel boom didn't temporarily change airline economics.

It permanently changed traveler behavior.

Many travelers believe airlines set prices based on cost. In reality, airlines set prices based on what travelers are willing to pay.

The pandemic didn't just disrupt air travel, it reshaped the value travelers place on experiences, comfort, and time.

And once consumers demonstrate they're willing to pay more for something, those prices rarely return to where they started.

That's why air travel didn't return to normal.

Because neither did we.