Airline fares continue to rise in August CPI

Airline fares jumped 2.4 percent in August following a 2.7 percent hike in July, according to the latest Consumer Price Index for All Urban Consumers (CPI-U) issued by the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

The increase in airline fares far outpaced the CPI-U, which increased a mere 0.2 percent in August on a seasonally adjusted basis.

However, airline fares as tracked by the BLS don't tell the whole story. Airlines continue to focus on increasing ancillary revenue, which carries an important caveat. While the BLS's calculations of airline fares include an allowance for checked bag fees, the BLS does not include other ancillary charges which represent an ever-larger percentage of airlines' overall revenue.

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 one 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, the BLS could easily incorporate that price increase.

Increases in the indexes for shelter and energy were the main contributors to the seasonally adjusted monthly increase in the all items index. The energy index increased 1.9 percent in August; a 3.0-percent increase in the gasoline index was the largest factor, but the other energy component indexes also rose. The shelter index increased 0.3 percent in August, the same increase as in July. The food index rose only slightly in August, with the index for food at home unchanged.

The index for all items less food and energy rose 0.1 percent in August, the smallest monthly increase since April. Along with the shelter index, the indexes for airline fares and used cars and trucks were among those that increased in August. An array of indexes declined, including apparel, medical care, communication, recreation, and personal care.

The all items index rose 2.7 percent for the 12 months ending August, a smaller increase than the 2.9 percent increase for the 12 months ending July. The index for all items less food and energy rose 2.2 percent for the 12 months ending August and the energy index increased 10.2 percent; these were both smaller increases than for the 12 months ending July. The food index increased 1.4 percent over the last 12 months, the same increase as for the period ending July, the BLS said in its Sept. 14 statement.

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