More seats and less demand means super-low fares to the Caribbean
Sadly, some islands just aren’t going to see much leisure travel this year. Places like St. Croix, Dominica, and Puerto Rico, beautiful islands all, don’t have the hotels or infrastructure to support tourism right now. With those flights seeing little to no demand, airlines still need to fill the seats, and are moving flights to new destinations.
“Airlines are scrambling to fill planes,” says Marmontello. “All these flights that were supposed to go to St. Maarten, St. Croix, the BVI, Dominica, for the airlines to get their first-quarter lift, they have to source those planes into another market.
“They increased flights into Cayman, Aruba, Punta Cana,” he continues. “And that’s gonna drive the price down because the demand isn’t as strong as the additional capacity.”
Basically, more available seats (supply) and fewer travelers (demand) equals lower fares for everyone. You may recall this concept from freshman year economics, but it’s far more memorable when a white sandy beach is involved.
Airlines were hedging their bets on fuel
Not to get too operations-geeky here, but jet fuel consumption is generally a pretty fixed quantity when flying over a specific route. Oftentimes, airlines will pre-purchase large quantities of that fuel at a lower price, to protect against spiking oil prices or, in this case, specific events that may necessitate dropping airfares to get people back in the skies. This is known as “fuel hedging.” It may sound familiar from our last economic downturn when it was credited with Southwest’s success when every other airline was in decline.
“Airlines have to drop prices right now to lure tourists back,” says Bisesto. “But they can still make money because of the fuel hedge. They buy it in advance in case of disaster, which is what happened this year.”