Airline Fares dip in December CPI

Airline fares fell 2.3 percent in December after increasing 3.5 percent in the November Consumer Price Index for All Urban Consumers, according to the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

Over the last 12 months, the index for airline fares declined 18.4 percent, the largest December-to-December decrease ever reported for that index. 


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 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 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 baggage fees are included, other similar nickel-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 International (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.

The seasonally adjusted 0.2 percent increase in the all items index was driven by an 8.4-percent increase in the gasoline index, which accounted for more than 60 percent of the overall increase. The other components of the energy index were mixed, resulting in an increase of 4.0 percent for the month. The food index rose in December, as both the food at home and the food away from home indexes increased 0.4 percent.

The index for all items less food and energy increased 0.1 percent in December after rising 0.2 percent in the previous month. The indexes for apparel, motor vehicle insurance, new vehicles, personal care, and household furnishings and operations all rose in December. The indexes for used cars and trucks, recreation, and medical care were among those to decline over the month.

The all items index rose 1.4 percent for the 12 months ending December, a slightly larger increase than the 1.2-percent rise reported for the period ending November. The index for all items less food and energy rose 1.6 percent over the last 12 months, as it did in the periods ending October and November. The food index rose 3.9 percent over the last 12 months, while the energy index fell 7.0 percent, the BLS said in its January 13 statement.

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