Airline fares jump again in May CPI

Airline fares jumped 7.0 percent in May after increasing 10.2 percent in April according to the Consumer Price Index (CPI) for All Urban Consumers from the Bureau of Labor Statistics (BLS), U.S. Department of Labor. May's leap in airline fares well outpaced the overall CPI, which increased just 0.6 percent for the month on a seasonally adjusted basis.



May's sharp jump combined with April's increase more than offset the price drops of 5.1 percent in February, 3.2 percent in January and 2.3 percent in December 2020. Over the last 12 months, the index has risen 24.1 percent percent despite the ongoing COVID-19 pandemic.

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 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.

In other areas, the index for used cars and trucks continued to rise sharply, increasing 7.3 percent in May. This increase accounted for about one-third of the seasonally adjusted all items increase. The food index increased 0.4 percent in May, the same increase as in April. The energy index was unchanged in May, with a decline in the gasoline index again offsetting increases in the electricity and natural gas indexes.

The index for all items less food and energy rose 0.7 percent in May after increasing 0.9 percent in April. Many of the same indexes continued to increase, including used cars and trucks, household furnishings and operations, new vehicles, and apparel in addition to air fares. The index for medical care fell slightly, one of the few major component indexes to decline in May.

The all items index rose 5.0 percent for the 12 months ending May; it has been trending up every month since January, when the 12-month change was 1.4 percent. The index for all items less food and energy rose 3.8 percent over the last 12-months, the largest 12-month increase since the period ending June 1992. The energy index rose 28.5 percent over the last 12-months, and the food index increased 2.2 percent, the BLS said in its June 10 statement.

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