Airline fares continue to slide in February CPI

Airline fares declined for the third month in a row in February, falling 5.1 percent after drops of 3.2 percent in January and 2.3 percent in December 2020 according to the February Consumer Price Index for All Urban Consumers from the Bureau of Labor Statistics (BLS), U.S. Department of Labor. The dip is in contrast to the overall CPI, which increased 0.4 percent for the month on a seasonally adjusted basis after rising 0.3 percent in January.

Industry observers as well as frequent flyers know that the CPI's airline fare index doesn'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 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 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 continues to put downward pressure on airline fare prices.  Over the last 12 months, the index declined 25.6 percent. 

The index for all items less food and energy rose 0.1 percent in February. The shelter index rose 0.2 percent in February, with the index for owners’ equivalent rent increasing 0.3 percent and the index for rent increasing 0.2 percent. The recreation index increased 0.6 percent in February after decreasing 0.6 percent in January. The motor vehicle insurance index also increased, rising 0.7 percent in February.

The medical care index rose 0.3 percent in February, although its components were mixed. The index for physicians’ services rose 2.0 percent over the month, but the index for prescription drugs declined 0.7 percent in February and the index for hospital services declined 0.1 percent.

The used cars and trucks index fell 0.9 percent over the month, as it did in the 2 previous months. The index for apparel declined 0.7 percent in February after increasing 2.2 percent in January. The indexes for new vehicles and household furnishings and operations were both unchanged over the month, the BLS said in its March 10 statement.

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