Jefferies sees airfares up 26.7% in May on easier comparisons

Investing.com - Airfares rose 26.7% year-over-year in May, accelerating from a 20.7% increase in April and a 14.9% gain in March, according to Bureau of Labor Statistics consumer price index data cited by Jefferies on Tuesday. On a month-over-month basis, airfares climbed 2.7% from April on a seasonally adjusted basis.

The overall CPI increased 4.2% year-over-year in May, matching consensus estimates, and rose 0.5% month-over-month, also in line with expectations. Core CPI gained 2.9% year-over-year, up 0.2 percentage points from March. Jefferies noted that airfares face easier year-over-year comparisons from February through June, as bookings were impacted by geopolitical concerns in spring 2025.

For the four major U.S. airlines, average passenger yields increased 1% year-over-year in 2025 to 16% above 2019 levels. Domestic yields rose 1% year-over-year and stood at 15% above 2019 levels, while international yields were flat year-over-year at 23% above 2019. The International Air Transport Association reported a 3.4% decrease in air traffic year-over-year in April 2026, compared to a 2.1% increase in March.

U.S. airline revenues are currently trending at 1.7% of disposable income, compared to a historical average of 2.0% or more. The Conference Board's Consumer Confidence Index decreased 0.6 points in May to 93.1 from 93.8 in April, while the Expectations Index improved by 1.0 points to 74.4, remaining below the 80 threshold for the 15th consecutive month.

The JETS exchange-traded fund has shown a relatively weak negative correlation with core CPI over the last ten years, but when isolating the correlation to only the last twelve months, it increases to 0.75, after a correlation of -0.31 in 2024. The fund was largely uncorrelated with rates post-COVID after moving in tandem prior, although there has been a negative correlation in the current cutting cycle.

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