Airline fares dip in December CPI

Airline fares dropped 1.5 percent in December following a 2.4 percent decline in November, 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 decline in airline fares far outpaced the CPI-U for the month, which dropped a mere 0.1 percent in December on a seasonally adjusted basis.

In 2018, airlines fares decreased for the sixth year in a row, falling 2.6 percent.  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.

In September, American Airlines (NASDAQ:AAL), United (NYSE:UAL), Delta Air Lines (NYSE:DAL) and jetBlue (NASDAQ:JBLU) raised fees for checked bags from $25 to $30 for the first bag, and from $35 to $40 for the second. In addition, jetBlue and Alaska (NYSE:ALK) also raised date-change fees. Neither of these is tracked in the airline fare index.

The index for all items less food and energy increased 0.2 percent in December. The shelter index increased 0.3 percent in December, the same increase as the prior month. The indexes for rent and owners' equivalent rent both increased 0.2 percent, while the index for lodging away from home rose 2.7 percent.

The recreation index rose in December, increasing 0.6 percent. The medical care index rose 0.3 percent in December with its major component indexes mixed. The index for hospital services rose 0.5 percent, the physicians' services index was unchanged, and the index for prescription drugs declined 0.4 percent. The index for household furnishings and operations rose 0.3 percent in December, and the education index rose 0.2 percent.

The index for used cars and trucks fell 0.2 percent after rising in October and November. The motor vehicle insurance index fell 0.2 percent, its second consecutive decline. Several indexes were unchanged in December, including those for new vehicles, apparel, and communication, the BLS said in its Jan. 11 statement.

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