Airline fares drop slightly in September CPI

Airline fares dropped 0.2 percent in the September Consumer Price Index for All Urban Consumers according to the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

The dip in airline fares ran counter to the overall increase of 0.2 percent, following a 0.4 percent increase in August. Over the last 12 months, the all items index increased 1.4 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.

Although the three major U.S. carriers recently announced in September that they would eliminate the fees for changing tickets, those nickle-and-dime charges remain, and the carriers continue in lock step. While American Airlines (NASDAQ:AAL) and Delta Air Lines (NYSE:DAL) quickly followed Untied's (NYSE:UAL) lead in abolishing change fees, 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. 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.

In other areas, the index for used cars and trucks continued to rise sharply and accounted for most of the monthly increase in the seasonally adjusted all items index. The food index was unchanged, with an increase in the food away from home index offsetting a decline in the food at home index. The energy index rose 0.8 percent in September as the index for natural gas increased 4.2 percent.

The index for all items less food and energy rose 0.2 percent in September after larger increases in July and August. The index for used cars and trucks rose 6.7 percent in September, its largest monthly increase since February 1969. The indexes for shelter, new vehicles, and recreation also increased in September. In addition to airline fares, the indexes for motor vehicle insurance and apparel declined over the month.

The all items index rose 1.4 percent for the 12 months ending September, a slightly larger increase than the 1.3-percent rise for the 12-month period ending August. The index for all items less food and energy rose 1.7 percent over the last 12 months, the same increase as the period ending August. The food index increased 3.9 percent over the last 12 months, while the energy index declined 7.7 percent, the BLS said in its October 13 statement.

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