Thursday, February 26, 2015

Airfares, overall CPI drop slightly amid sharply lower energy costs

Airline fares continued to decline in January and fell less than half a percentage point in the first month of 2015, according to the latest figures on the Consumer Price Index for All Urban Consumers (CPI-U) issued by the Bureau of Labor Statistics, U.S. Department of Labor.

January's airline fare index fell 0.3 percent after declining 5.0 percent in December 2014, more than offsetting increases of 1.4 percent in November and 2.4 percent in October. Prior to those two consecutive monthly increases, prices had fallen 5.9 percent in July, 4.7 percent in August, and 0.5 percent in September.

The January dip, combined with declines in other indexes, resulted in a seasonally adjusted CPI-U that was down 0.7 percent from the December figure.

For 2014 overall, airline fares declined 4.7 percent, following a 1.7 percent drop the previous year, the BLS said in its Jan. 15 statement on the CPI-U. Accordingly, January’s drop starts 2015 on a positive to neutral note.

The calculations of airline fares include an allowance for checked bag fees but the Bureau of Labor Statistics (BLS) does not include other ancillary charges.

The agency found a certain percentage of passengers checked bags. It applies that percentage to all  incoming quotes during sample rotation and then assigns the appropriate checked bag fee (assuming 1 bag, for either one-way or round-trip, based on the description of the quote). It also applies baggage specs to airlines that do not charge for bags so that if they start to charge in the future, BLS could easily incorporate that price increase.

January’s decrease in the airline fare index paled in comparison to the 9.7 percent decline in the energy index, which included an 18.7 percent plummet in the gasoline index in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been unchanged, the BLS said in its Feb. 26 statement on the index.

While the slight downward move in airline fares is a positive for air travelers, the gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been unchanged.

On a seasonally adjusted basis, the index for all items less food and energy rose 0.2 percent in January following a static December index and increases of 0.1 percent in November, 0.2 percent in October and 0.1 percent in September.

The all items index declined 0.1 percent over the last 12 months, the first negative 12-month change since the period ending October 2009, the BLS said. The energy index fell 19.6 percent over the span, with the gasoline index down 35.4 percent. The food index rose 3.2 percent, and the index for all items less food and energy increased 1.6 percent.

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Photos by Carl Dombek
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