You open the airline app for an innocent little peek at a flight for the holiday weekend and — damn — you nearly spill your coffee on the keyboard.
The price doubled.
This isn't rhetorical exaggeration. This isn't clickbait. The Wall Street Journal ran a piece saying that airfares in the United States doubled on some routes for the spring travel season. The so-called "sticker shock" hit Americans with the subtlety of a Mike Tyson in the '90s.
The American air circus
Let's get to the point.
US airlines are charging an arm and a leg for routes that cost half the price a year ago. Popular spring destinations — Florida, the Caribbean, the West Coast — turned into luxury items overnight.
And why is this happening? The short answer: tight supply, demand through the roof, and expensive fuel.
The long answer involves years of capacity mismanagement, industry consolidation (fewer and fewer airlines competing), and that classic pricing power dynamic that kicks in when consumers have no alternative. This is what happens when oligopolies realize they can squeeze harder. And they squeeze.
Remember that scene in The Dark Knight where the Joker burns the mountain of cash? Airlines do the opposite — they build the mountain, pulling money out of your pocket with enviable efficiency.
"Oh, but that's a US problem"
Hold up.
If you think this is exclusively an American headache, let me remind you that Brazilians have been living this hell for years. The average price of domestic flights in Brazil has gone up brutally since 2020. Someone who used to fly São Paulo to Salvador for R$400 round trip now pays R$1,200 if they're lucky. And if it's last minute? Buddy, it's cheaper to rent a car and drive.
Gol and Azul play the same game as the American carriers: yield management turbocharged by algorithms that know exactly how much you're willing to pay. And when an airline exits the market — like Avianca did a few years back — the ones left celebrate quietly, because less competition means more pricing power.
It's capitalism doing its thing. No villain, no conspiracy. Just supply and demand in an oligopolistic structure. Adam Smith wouldn't be surprised.
What investors should see here
Higher fares mean fatter margins for the airlines — at least in the short term. Anyone positioned in US airline stocks (Delta, United, Southwest) might be grinning. These companies' shares have had decent performance in recent months precisely because the market priced in this pricing power.
But here's where the danger lurks, and Warren Buffett knows it well. The Oracle of Omaha has a love-hate relationship with airlines — he invested heavily in them before the pandemic and sold everything in the 2020 panic. Buffett has always said the airline industry is a capital destroyer over the long haul. Margins come and go. Fuel prices spike. Unions push back. The government regulates. And the cycle repeats.
If the American consumer — already bleeding through their credit card — decides they're not paying $800 for a route that used to cost $350, demand drops. And when demand drops, airlines enter a price war. And when they enter a price war, margins turn to dust.
Nassim Taleb would call this fragility disguised as strength. Today's fat margin is tomorrow's invitation to a nosedive.
And where does this leave Brazilians?
Pay attention. If fares abroad are at these levels, international tourism for the Brazilian middle class — already expensive — becomes even more prohibitive. High dollar + expensive airfare = vacation on the São Paulo coast.
There's no magic trick. There's no financial hack. There's no Instagram guru who's going to fix this with "free miles."
The question that remains is simple and uncomfortable: if even Americans are getting sticker shock from the price of flying, how long before Brazilian airlines realize they've squeezed the lemon until there's no juice left?
Or can the lemon still take it?
