Airline fares take big jump in October CPI

Airline fares jumped 6.3 percent in the October Consumer Price Index for All Urban Consumers according to the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

The jump in airline fares follows a 2.0 percent decline in September and stands in dramatic contrast to the overall CPI, which was unchanged in October following a 0.4 percent increase in September and a 0.2 percent increase in August. Over the last 12 months, the all items index increased 1.2 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 announced in September that they would eliminate the fees for changing tickets, other 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 earlier this 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 baggages fees are included, other similar nickle-and-dime charges are not tracked in the airline fare index.

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 travel increasing, the prices are following suit.

In other areas, component indexes were mixed, with many offsetting increases and decreases. The food index rose 0.2 percent, with the food away from home index increasing by 0.3 percent and a smaller 0.1-percent rise in the food at home index. The energy index rose 0.1 percent in October as the index for electricity increased 1.2 percent.

The index for all items less food and energy was unchanged in October following an increase of 0.2 percent in September. The index for shelter increased 0.1 percent in October, which was offset by a 0.4- percent decrease in the index for medical care. In addition to airline fares, the indexes for recreation, and new vehicles were among those to rise, while the indexes for motor vehicle insurance, apparel, and household furnishings and operations declined.

The all items index rose 1.2 percent for the 12 months ending October, a slightly smaller increase than the 1.4-percent rise for the 12-month period ending September. The index for all items less food and energy rose 1.6 percent over the last 12 months after rising 1.7 percent in September. The food index increased 3.9 percent over the last 12 months, while the energy index declined 9.2 percent, the BLS said in its November 12 statement.

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