Airline fares rise in June, July CPIs

Airline fares rose a total of 8 percent in June and July, partially offsetting a plummet of nearly 20 percent across April and May, according to data issued by the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

The increase in airline fares contributed to the slight rise in the overall July Consumer Price Index for All Urban Consumers (CPI-U), which rose 0.6 percent for the month 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. Now, with lockdown lifting and travel increasing, the prices are following suit.

Elsewhere, the gasoline index continued to rise in July after increasing sharply in June and accounted for about one quarter of the monthly increase in the seasonally adjusted all items index. The energy index increased 2.5 percent in July as the gasoline index rose 5.6 percent. This was partially offset by the food index, which decreased 0.4 percent in July, with the index for food at home declining 1.1 percent, according to the BLS.

The index for all items less food and energy rose 0.6 percent in July, its largest increase since January 1991. The index for motor vehicle insurance increased sharply in July, as it did the previous month. The indexes for shelter, communication, used cars and trucks, and medical care also increased in July, while the index for recreation declined.

The all items index increased 1.0 percent for the 12 months ending July, a larger increase than the 0.6- percent rise for the period ending June. The index for all items less food and energy increased 1.6 percent over the last 12 months. The food index increased 4.1 percent over the last 12 months, with the index for food at home rising 4.6 percent. Despite increasing in July, the energy index fell 11.2 percent over the last 12 months, the BLS said in its August 12 statement.

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