Airlines will increase their fares this summer. here's why

The grounding of the Boeing 737 Max has put 371 aircraft out of service around the world for an indefinite period. Boeing (BA) also stopped deliveries of new aircraft that could have been in service by the time the peak summer season arrived. European carrier at a reduced price Ryanair (RYAAY) was waiting for his first 737 Max when deliveries were stopped.

Among The biggest customers of 737 Max are discount airlines, like South West (LUV) in the United States and Norwegian Air in Europe. These carriers are putting pressure on fares, force other airlines to offer more seats at lower prices to attract leisure travelers. Fewer flights operated by discount carriers mean less competition for other carriers and less incentive to offer discounted seats in their aircraft.

Uncertainty over the return to service of the Boeing 737 Max has caused airlines to cancel hundreds of flights a day August. Southwest canceled its flights until August at the end of last week and American Airlines (AAL), the largest carrier in the world, did the same thing on Sunday. United Airlines (UAL), the third American airline with a version of the 737 Max in its fleet, canceled its flights until early July.

United, Tuesday, said how much its production capacity would increase this year. It forecasts growth of up to 5%, down from the previous forecast of 6%. He also said he expects a 2.5% increase in airline ticket sales between April and June.

Summer is the peak season for airlines. They have put as many aircrafts as possible, which means that fewer additional planes will be available to replace the missing 737 Max.

"All airlines have additional planes at all times, but in the summer, the system is subject to more stringent restraints," said Philip Baggaley, chief credit analyst of Standard & Poor's transportation companies.

The problems of the 737 Max are not the only reason why fares will be higher this summer. A strong US economy, with an almost record unemployment rate, has increased travel demand. And higher jet fuel prices limit routes that airlines are willing to borrow.

"It's hard to tell the 737 Max's impact from other factors," Baggaley said.

When fuel is lower, airlines will add flights on routes for which they may not be profitable, which will increase passenger choice and lower fares. The reverse occurs when fuel prices are higher. Fuel prices are about 20% higher than a year ago and are expected to increase over the next three months.

All Boeing Max aircraft were anchored around the world last month after a 737 jet aircraft piloted by Ethiopian Airlines pilots crashed into that country, killing all passengers at edge. It was the second fatal accident involving a Max in recent months. A Lion Air flight crashed in October.

Investigators believe that accidents are linked to an automatic safety function of the new jet that forced his nose.