Wednesday, September 17, 2014

Airline fares plummet in August, now 3 percent below last year

A significant decline in airline fares contributed to a slight decline in the Consumer Price Index for All Urban Consumers (CPI-U) in August, the Bureau of Labor Statistics (BLS) announced Sept. 17.

Airline fares posted a considerable decline in comparison to the figures for other categories, the second sharp decline for that index in two months. Fares dropped 4.7 percent in August following a 5.9 percent decline in July. The two monthly reductions more than offset the 10.9 percent increase posted between February and June, and resulted in a net decline of 2.7 percent for the index over the last 12 months.

The calculations of airline fare do include an allowance for checked bag fees but the BLS does not include other ancillary charges.

"We found a certain percentage of passengers checked bags," a BLS spokesperson told TheTravelPro in an e-mail. "We apply this percentage to all incoming quotes during sample rotation and then assign the appropriate checked bag fee (assuming 1 bag, for either one-way or round-trip, based on the description of the quote). We even apply baggage specs to airlines that do not charge for bags so that if they start to charge in the future, we could easily incorporate that price increase."

Declines in other indexes also help offset increases in categories including shelter, new vehicles and alcoholic beverages. Other indexes experiencing dips included the recreation index, which fell 0.4 percent in August, its largest decline since December 2009. Household furnishings and operations fell 0.3 percent, and the apparel index declined 0.2 percent.

The medical care index was unchanged in August, the first time since December 2013 it did not increase. The index for medical care services was unchanged, as was the index for prescription drugs.

Of the indexes showing increases, the alcoholic beverage index rose 0.8 percent in August, its largest increase since January 2007. The new vehicles index, which increased 0.3 percent in July, rose 0.2 percent in August, and the personal care index advanced 0.1 percent.

The index for all items less food and energy was unchanged in August after rising 0.1 percent in July. Overall, the CPI-U decreased 0.2 percent in August after rising 0.1 percent in July, marking the first decline since April 2013.

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This post, originally published on Sept. 17, was updated Sept. 19 to include the BLS' response to TheTravelPro's question about methodology and inclusion of checked bag fees in its calculation of airfare costs. 

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