Connect with us

Economy

How airline prices will evolve without change fees

Published

on

How airline prices will evolve without change fees

Over the past 48 hours, we’ve seen what is arguably the most positive change in US airline policy in decades – change fees (for most routes and fare types) have been permanently canceled. Alaska, American, Deltaand United!

While most of us can probably understand why this policy makes sense right now, how it will evolve over time, and will this change really be permanent as promised? I thought I’d share my thoughts on how I see the development of this situation …

Airlines need to waive the change fee right now

I think almost everyone can understand why the airline cut makes sense now and for the foreseeable future:

  • Airlines are trying to convince people to book tickets in the future, given how uncertainty is.
  • We’ve seen airlines introduce travel waivers, but these were temporary and in some cases quite confusing.
  • In the next couple of years (at least), consumers will need flexibility, and these policy changes address that issue.

Airlines must offer flexibility to consumers now

What happens when the journey recovers?

Consumers are in control right now. A logical question arises: what will happen when the aviation industry recovers. Historically, US airlines have made billions of dollars a year from surcharges, and they are not charities, so surely they are not going to give up the change fees out of the goodness of their soul?

If you ask me, this new policy change might make sense in the long run and reflect a broader shift in airlines’ approaches to ticket pricing.

There are several factors to consider here:

  • Over the past few years, airlines have introduced basic economy class fares to better compete with carriers’ ultra-low fares; these rates cannot be changed or canceled
  • Even before the pandemic, airline tickets were as cheap as ever, adjusted for inflation.
  • However, airlines have increased their shift fees over time to such an extent that, in many cases, the shift fees were more expensive than the cost of the ticket.

Let me give you an example of airfares pricing that perhaps demonstrates this. As an example, take an American Airlines one-way flight from Tampa to Miami, the prices of which are as follows:

  • Basic Economy Fares are $ 38.
  • The fare for the main cabin is $ 73 (1.9x Basic Economy).
  • The cost of the flexible fare in the main cabin is $ 262 (6.9 times higher than the basic economy class).
  • The fully flexible main cabin fare is $ 414 (10.9 times the base Economy Class).

Airlines have worked hard to create fare types for almost any customer, but is there something missing here? What if the consumer wants flexibility at a reasonable cost? Is it logical that the cheapest flexible fare in the main cabin is almost seven times more than in Basic Economy and more than three times more than in the main cabin?

One of the advantages of the main cabin over the basic economy class is that the ticket can be changed for a fee. But this is a useless bonus when the change fee is $ 200 and your ticket costs less than that.

I think that by abolishing change fees, airlines are getting creative with this issue.

Airline pricing is sometimes not so rational

Basic Economy Class will be the new “normal” fare.

Once travel is re-established, airlines may indeed retain the waived non-Basic Economy flight change fees. The catch is that the difference in prices between the “normal” economy and the underlying economy is likely to widen over time.

To be honest, I cannot blame the airlines for this. There is currently no fare for the “big three” US carriers that offers you the flexibility without having to pay exponentially for your ticket. In the long run, we may see an increase in the premium for “regular” economy class by an additional $ 25 per ticket or something.

I think that the general intention of this was made clear by American airlines yesterday. In announcing the cancellation of change fees, American Airlines also announced that base class passengers will be less constrained and will be able to pay for seat assignments, upgrades, priority boarding and more.

In other words, if the base economy fare is less restrictive and offers a shared experience, it is much easier for airlines to argue that “regular” economy class is a combined experience for which you should be willing to pay a higher premium.

Expect the cost of “buying” from the underlying economy to rise.

Bottom line

The airline’s elimination of replacement fees is a positive development, and I wouldn’t be surprised if it continues in the long run. However, once travel truly recovers, I expect that the price differential between basic economy and “regular” economy will continue to widen to reflect the fact that regular tickets offer more flexible travel options.

In the end, this is okay and completely fair to me, as the absence of any middle ground between non-refundable tickets and exponentially more expensive fully refundable tickets seemed like a missed opportunity.

How do you see the development of airfare when the change fee is canceled?

See also  French company Icade Santé buys three Lusíadas hospitals for 213 million from Fidelidade - Imobiliário
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Economy

Fasten your seat belts well. Volatility persists on Wall Street – Stock Exchange

Published

on

Fasten your seat belts well.  Volatility persists on Wall Street - Stock Exchange

Stocks on the other side of the Atlantic have experienced another day of high emotions, a real roller coaster, to the point where CNN Business said “investors better tighten their belts because there is no sign of an end to Wall Street volatility.” .

The Dow Jones industrial index fell 0.19% to 34,297.73 points. Remember, on January 5th it reached a level that was not there before, 36,952.65 points.

The Dow Jones index was losing ground in the sell-off move that was seen for most of the session, but in the last hour of trading it managed to turn around, as it did yesterday. However, in the last stretch, he again caught his breath, and he returned to negative terrain.

Johnson & Johnson and American Express, which are the two components of the Dow, fared well after delivering good “forecasts” in their keynote presentations that helped revitalize the index, but not enough to keep it afloat.

The Standard & Poor’s 500 closed down 1.22% at 4356.45. Its all-time high was reached in intraday trading on January 4 at 4818.62 points.

On the other hand, the technology index Nasdaq Composite, which is in the correction zone, depreciated by 2.28% and stopped at 13,539.30 points. The Nasdaq’s all-time high is 16,212.23 points, set on November 22.

Contributing to strong volatility was a two-day Fed meeting that kept investors waiting. Tomorrow at 19:00 in Lisbon, instructions on the monetary policy of the Central Bank will be given, but everything still indicates that the Fed will start raising the key rate in March.

See also  PSI-20 returns to negative with almost 3% EDP loss, eclipsing BCP and Galp gains - Mercados in a minute

Investors are also attentive to the presentation of technology accounts. After Netflix on Thursday and IBM this week, it will be Microsoft’s turn today to publish its results after the stock markets close. Tesla follows tomorrow and Apple on Thursday.

Maybe a new rally

Pains and Capital, in a research note that Negosios had access to, indicated yesterday that the sell-off registered last week caused the S&P 500 to lose the equivalent of six months of gains.

“The big question for investors this week is: Where do we go next? First, the market is deeply oversold. The S&P 500 is showing the lowest Relative Strength Index (RSI) reading since the March 2020 crash. However, the market is as oversold as and during the first wave of the global pandemic,” said Graham Summers, chief strategist at Phoenix Capital Management, in the aforementioned “research” by Gains Pains Capital.

“This suggests a bounce is expected. It is highly unlikely that stocks will continue to fall from now on. Instead, we may have a rally after the Fed meeting on Wednesday. extra “foam” from the markets,” he added.

Near debut for the S&P 500

On Tuesday, the S&P 500 reversed its negative trend and entered a bullish field, and if it maintained a positive trend until the close, that would be a feat.

According to Bloomberg data dating back to the early 1980s, the S&P 500 never dropped at least 2% from the previous session for two consecutive sessions before ending up positive. And today was supposed to happen.

See also  The cost of construction of new housing in October has risen in price by the maximum since 2008 | Construction

Another interesting statistic is that only eight times – on two consecutive days – did the index fall 1% during intraday trading and then close higher: three times in 2002, three times in 2008-2009 (during global financial crisis), once in 2015. and one in 2020.

“Buy dip”

One of the reasons for the retracement throughout the session and even into the close (just like yesterday) is the fact that many investors take advantage of the dip to buy – so-called “buying the dip”.

“Stock buyers have resurfaced to take advantage of shares at a bargain price after a sell-off sparked by fears of a tougher Fed stance and a Russian military buildup on the border with Ukraine,” Bloomberg notes.

Continue Reading

Economy

Broken recovery and high inflation: this will be the year 2022, according to the IMF

Published

on

Broken recovery and high inflation: this will be the year 2022, according to the IMF

The recovery of the economy from the crisis caused by the pandemic will slow down in 2022, according to the forecasts of the International Monetary Fund (IMF), published on Tuesday in Washington. Annual global growth will slow from 5.9% in 2021—the highest level since 1973—to 4.4% in 2022 and 3.8% in 2023, a more optimistic trajectory than that recently proposed by the World bank.

The progressive slowdown is due to a “glut of growing cases” that pile up without resolution and exacerbate disparities in the pace of economic recovery in various parts of the world, fueling rising inflation in all major cities. especially the US — and disruptions in global supply chains forcing governments to start tightening fiscal policy to deal with record global public debt close to 100% of global GDP. To all this “burden”, the IMF adds growing geopolitical tensions (especially in Eastern Europe and the Asia-Pacific region), a gap in covid vaccinations (only 4% in poor countries) and a high probability of a multiplication of natural disasters due to climate. change.

Undermining the global economy

It is therefore not surprising that the IMF document released on Tuesday bears the ambiguous title “Hull Overload, Discontinuous Recovery and High Inflation”. Also, in a pessimistic tone, the speech of the Fund’s chief economist, and since last week, the first deputy general director, Gita Gopinath, was published. “Destroyed World Economy”named number two by Kristalina Georgieva in an article she published on the institution’s blog summarizing global trends.

As a result of this “overload” of growing and persistent problems, IMF economists cut growth forecasts for the world and the seven largest economies.compared to what they advanced in the World Economic Outlook (WEO) last October. This January publication is a limited interim update for large countries only, not including forecasts for small and medium-sized countries such as Portugal, which will not be published until April when the new full edition of the WEO is released.

Among the scissors, the highest cuts in growth Brazil (which is decelerating sharply, from 4.7% in 2021 to 0.3% in 2022, already close to stagnation), USA and Mexicoand more moderate for Germany, Canada, China and Spain.

See also  PSI-20 returns to negative with almost 3% EDP loss, eclipsing BCP and Galp gains - Mercados in a minute

Some good news for Portugal

Despite lower forecasts, the global dynamics this year will be marked by strong divergence in growth rates.

According to the IMF, the ten largest economies will accelerate in 2022: Germany, Saudi Arabia, the five members of ASEAN (Association of Southeast Asian Nations), Spain, India (which turned out to be the largest economy with the highest growth rates). surpassing China) and Japan. The acceleration in Germany and Spain is good news for Portugal, which has these countries among its main export destinations.

On the contrary, there are 10 other major countries that have slowed down this year: South Africa, Brazil (the most dramatic case since the austerity introduced in 2021 by Economy Minister Paulo Guedes and consecutive interest rate hikes by the Brazilian Central Bank), China. (whose growth will almost halve and remain below 5%), the US, France, Italy, Mexico, the UK, Russia and the eurozone as a whole (slowing down from 5.2% in 2021 to 3.9% in 2022). Some of these countries are Portugal’s export destinations and these forecasts are a warning.

But these forecasts may have to be revised again in April or summer. There are problems that could get worse, the IMF quotes: the development of the pandemic; how China will deal with the real estate crisis and the disruption caused by the zero covid policy; multiplication of natural disasters; the growth of popular uprisings against the high cost of living; and exacerbation of geopolitical tensionswith the rise of Russia and China.

Inflation does not leave us, but next year it will decrease

Restrictions spurring consumer price growth will not ease in 2022. On the contrary, according to the IMF forecast, the surge in inflation will continue this year, and next year there will be only signs of a slowdown.

Some of the components that put the most pressure on the consumer price index, according to the forecasts of the Fund’s economists, will continue to grow: the average price of a barrel of oil of various grades will rise by 12%, the price of natural gas will rise by 58%, and the price of food raw materials will rise by another 4.5%.

See also  Fed Gives First Signs of Change Among Major Central Banks | USA

As a result of these price developments, forecasts point to an increase in US annual inflation from 5.3% (highest since 1990) last year to 5.9% this year (new high since 1982). Although at lower levels, a similar trajectory is expected for the eurozone, from 2.6% last year to 3% this year, the highest since 2011. In the case of emerging market and developing countries, the average annual rate will increase from 5.7%. up 5.9% over this period.

Anyway, inflation surge in 2023 slows down, proving to be “short-term”, although the IMF document does not use the word banned in official communications by many central banks. In the euro area, the forecast points to a decline in inflation in 2023 to 1.7%, which is slightly below even the forecasts (1.8%) presented by the European Central Bank (ECB) in support of the strategy approved and confirmed by President Christine Lagarde. ECB. In the US, inflation will fall to 2.7%, still above the Federal Reserve’s target (which wants to control prices at around 2%). In emerging and developing markets, it will decrease from 5.9% in 2022 to 4.7% in 2023.

Monetary tightening hurts: IMF recommends debt restructuring for the most vulnerable

This year, the IMF does not propose a single recipe, emphasizing the diversity of situations and the recommendation that “policies should be adapted to specific circumstances.” Kristalina Georgieva, CEO of the Fund, has already put forward this orientation in a debate held at the World Economic Forum conference in Davos this month. However, he cannot fail to highlight two central trends that will intensify in 2022: greater monetary and fiscal tightening.

Monetary tightening began last year when 50 central banks, mostly in emerging market and developing economies, raised interest rates.followed by some major central banks such as the Bank of England. Interest rate increases are expected to take first place this year. in several banks in developed countries, starting with the US Federal Reserve System (FRS), and that asset purchase programs have been discontinued in whole or in part, with the exception of Japan (which will deal with inflation around 1%). China has also shown itself to be opposed to monetary tightening, but the IMF will release an analysis of the Chinese economy on Thursday after the institution’s latest Article IV visit (allowing for this regular analysis).

See also  Why Cathay Pacific, Singapore Airways may just take lengthier to get well

The tightening by the Fed will have global consequences, the IMF warns. The way the Fed communicates the removal of stimulus will or will not allow a correction to a greater or lesser extent. “ordered” in the markets,” said Geeta Gopinath at a press conference following the publication of the forecasts. A correction in some markets is expected or already underway, and some “are seeing high levels of exuberance,” Gopinath added.

“All countries must prepare for tightening financial conditions” and, in particular, emerging market and emerging market countries with more dollar debt will face “shocks,” the IMF document said. The fund advises them to try to negotiate (extend) maturities or even seek international support to restructure their debts. The IMF is calling on the G20 and private lenders to impose a debt moratorium on the 60% of the lowest-income countries that are already at risk of maximum stress.

On the budget side, government accounts will once again be “under pressure in the coming months and years” and governments should once again be “committed to demonstrating a medium-term plan that guarantees a path to debt sustainability,” the Fund advises. Brazil was the pioneer of austerity in 2021, and the award was received by Economy Minister Paulo Guedes during a debate held in Davos, where he stressed that he hoped to lock in a budget surplus in 2021 and that the Central Bank raised the Selic interest rate. several times. The next result, if the IMF forecasts come true, is a sharp decline in growth in 2022, approaching stagnation. Growth will accelerate next year, but only to 1.6%.

Continue Reading

Economy

Landlords must report rent by the end of the month. Set this and other IRS dates until the declaration is delivered

Published

on

Landlords must report rent by the end of the month.  Set this and other IRS dates until the declaration is delivered

UNTIL THE END OF THE MONTH

CLAIM INCOME

Landlords who are exempt and have not chosen to issue electronic rent receipts must submit a Model 44 return to the Finance Department via the Internet by the end of this month – Sunday 30th. delivered to the department by the following Friday.

And who are these taxpayers who are exempt from electronic income receipts?

These are owners who do not have and are not required to have an e-mail box and who did not receive more than 877,622 euros of rent (double the social support index) in 2021. These two conditions are combined.

Landlords who were 65 years of age or older on December 31, 2021, and taxpayers who receive rent under agreements covered by the Rural Lease Scheme, are also exempt.

UNTIL 15 FEBRUARY

˂ Consult and update your personal page on the Financial Portal with your family composition and other relevant personal items, such as the email address or NIB to which the state should transfer the IRS refund.

˂ Indicate spending on education and training in the interior of the country or in the autonomous region. You can deduct 40% of these fees up to a limit of one thousand euros, and the rent paid for the maintenance of a relocated student is not more than 300 euros.

˂ Tell the finance department about the rent for permanent housing if you have moved to the hinterland. You can deduct up to one thousand euros in the IRS instead of the usual 502 euros.

See also  French company Icade Santé buys three Lusíadas hospitals for 213 million from Fidelidade - Imobiliário

˂ Consider the duration of long-term permanent housing leases (contracts of up to two years or more), as well as the termination of such contracts. This type of lease benefits from lower tax rates, which decrease in proportion to the number of years the property is occupied, as agreed with the tenant. This is done through the financial portal.

UNTIL 25 FEBRUARY

CHECK BILLS

It is time to check or report, if your e-invoice portal personal account is not displayed in your personal account, invoices for expenses incurred in 2021. Based on these expenses, the IRS calculates a withholding from the IRS Fee, which reduces the weight of the invoice and increases the government’s possible refund. Thus, in addition to promoting a fairer tax system, the IRS is cutting costs when requesting an invoice with a taxpayer number for education and training, health care, and housing expenses.

There is also a discount related to general family expenses, which includes any fees, up to a deduction limit of €250 per taxpayer (€335 for single parent families). Maintenance payments determined by the court must also be indicated in the declaration according to model 3, since 20% of their total amount can be deducted from the tax. Don’t forget to request an invoice in certain areas of activity corresponding to the percentage of VAT paid in your pocket: 15% for car and motorcycle repairs, accommodation and meals, hairdressing, veterinary activities and gyms and 100% for expenses. with monthly passes for public transport.

Finally, keep in mind that there is a general limit to the set of tax deductions and benefits that follows from the mathematical formula. It varies by household income, the higher the lower the ceiling. Families with three or more children are eligible for an increase in the limit.

See also  CTT Adjusted Nearly 4% In One Day For PSI-20 - Markets

FROM APRIL TO JUNE 30

Open an IRS campaign. It is not recommended to send or confirm the data, if they are subject to automatic declaration, during the first 15 days of the period, since, as a rule, it is during this period that the technical services detect possible errors in the system and correct them. You will not be affected in terms of calculating your tax, but you may be penalized with an increase in the time it takes to settle your return and the corresponding tax refund, if applicable.

Continue Reading

Trending