Airline fares rise sharply in April CPI

Airline fares jumped 10.2 percent in April to the April Consumer Price Index for All Urban Consumers from the Bureau of Labor Statistics (BLS), U.S. Department of Labor. The dramatic leap followed a modest rise in March and outpaced the overall CPI, which increased 0.8 percent for the month on a seasonally adjusted basis.



April's sharp jump, combined with a 0.4 percent increase in March, almost completely offset the price drops of 5.1 percent in February, 3.2 percent in January and 2.3 percent in December 2020. Over the last 12 months, the index has risen 9.6 percent percent despite the ongoing COVID-19 pandemic.

Industry observers as well as frequent flyers know that the CPI's airline fare index does not necessarily reflect the all-in cost of an airline journey. 

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.

Although the three major U.S. carriers announced in September 2020 that they would eliminate the fees for changing tickets, other nickel-and-dime charges remain, and the carriers continue in lock step. While American Airlines (NASDAQ:AAL) and Delta Air Lines (NYSE:DAL) quickly followed United's (NYSE:UAL) lead in abolishing change fees last year, in September 2018 AA, Delta, United and jetBlue (NASDAQ:JBLU) all raised fees for checked bags from $25 to $30 for the first bag, and from $35 to $40 for the second. While baggage fees are included, other similar nickel-and-dime charges are not tracked in the airline fare index.

In other areas, the index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase. The food index increased in April, rising 0.4 percent as the indexes for food at home and food away from home both increased. The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas.

The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for airline fares, used cars and trucks, the indexes for shelter, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.

The all items index rose 4.2 percent for the 12 months ending April, a larger increase than the 2.6- percent increase for the period ending March. Similarly, the index for all items less food and energy rose 3.0 percent over the last 12 months, a larger increase than the 1.6-percent rise over the 12 month period ending in March. The energy index rose 25.1 percent over the last 12-months, and the food index increased 2.4 percent, the BLS said in its May 12 statement.

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