Airline fares rise again in December CPI

Airline fares continue to march upward, rising 2.7 percent in December following a 4.7 percent jump in November. Prior to the November uptick, fares had declined for three straight months, according to the Consumer Price Index (CPI) for All Urban Consumers. As in November, December's airline fare increase outpaced the overall CPI, which rose 0.5 percent for the month on a seasonally adjusted basis after an increase of 0.8 percent in November, according to the Bureau of Labor Statistics.



Over the last 12 months, the index for airline fares rose a net 1.4 percent.

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 February 2020 United raised its fees for checked bags from $30 to $35 for the first bag, and from $40 to $45 for the second. jetBlue (NASDAQ:JBLU) quickly followed suit, while American and Delta held fast at $30 for the first bag and $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, increases in the indexes for shelter and for used cars and trucks were the largest contributors to the seasonally adjusted all items increase. The food index also contributed, although it increased less than in recent months, rising 0.5 percent in December. The energy index declined in December, ending a long series of increases; it fell 0.4 percent as the indexes for gasoline and natural gas both decreased.

The index for all items less food and energy rose 0.6 percent in December following a 0.5-percent increase in November. This was the sixth time in the last 9 months it has increased at least 0.5 percent. Along with the indexes for shelter and for used cars and trucks, the indexes for household furnishings and operations, apparel, new vehicles, and medical care all increased in December. As in November, the indexes for motor vehicle insurance and recreation were among the few to decline over the month.

The all items index rose 7.0 percent for the 12 months ending December, the largest 12-month increase since the period ending June 1982. The all items less food and energy index rose 5.5 percent, the largest 12-month change since the period ending February 1991. The energy index rose 29.3 percent over the last year, and the food index increased 6.3 percent, the BLS said in its Jan. 12 statement.

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