Airline fare continue to slide in May CPI

Airline fares dropped 4.9 percent in May on the heels of a 15 percent plummet in April according to the monthly Consumer Price Index for All Urban Consumers (CPI-U) issued by the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

The drop in airline fares contributed to the drop in the overall CPI-U, which declined 0.1 percent in May on a seasonally adjusted basis. Over the last 12 months, the all items index increased 0.1 percent before seasonal adjustment.


Frequent flyers know that airline fare index as reflected in the CPI 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 2018, 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. These and other factors are not tracked in the airline fare index.

Clearly, the COVID-19 pandemic put downward pressure on prices.  When I returned to Seattle-Tacoma Internation (SEA) from Nashville, Tennessee International (BNA) on March 29, the "Main Cabins" of my two Delta Air Lines (NYSE:DAL) flights were perhaps 1/3 full.

Declines in the indexes for motor vehicle insurance, energy, and apparel more than offset increases in food and shelter indexes to result in the monthly decrease in the seasonally adjusted all items index. The gasoline index declined 3.5 percent in May, leading to a 1.8-percent decline in the energy index. The food index, in contrast, increased 0.7 percent in May as the index for food at home rose 1.0 percent.

The index for all items less food and energy fell 0.1 percent in May, its third consecutive monthly decline. This is the first time this index has ever declined in three consecutive months. Along with airline fares, the indexes for motor vehicle insurance and apparel, and used cars and trucks declined in May. The indexes for shelter, recreation, medical care, household furnishings and operations, and new vehicles all increased.

The all items index increased 0.1 percent for the 12 months ending May. The index for all items less food and energy increased 1.2 percent over the last 12 months; this compares to a 2.4-percent increase a few months ago (the period ending February). The energy index fell 18.9 percent over the last year. The food index increased 4.0 percent over the last 12 months, with the index for food at home rising 4.8 percent, the BLS said in its June 10 statement.

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