Airline fares drop slightly in July CPI

Airline fares reversed course in July, declining a scant 0.1 percent after rising sharply in recent months, according to the Consumer Price Index (CPI) for All Urban Consumers from the Bureau of Labor Statistics (BLS), U.S. Department of Labor. July's airline fare decrease ran counter to the overall CPI, which increased 0.5 percent for the month on a seasonally adjusted basis.



Over the last 12 months, the index has risen 24 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 indexes for shelter, food, energy, and new vehicles all increased in July and contributed to the monthly all items seasonally adjusted increase. The food index increased 0.7 percent in July as five of the major grocery store food group indexes rose, and the food away from home index increased 0.8 percent. The energy index rose 1.6 percent in July, as the gasoline index increased 2.4 percent and other energy component indexes also rose.

The index for all items less food and energy rose 0.3 percent in July after increasing 0.9 percent in June. Along with shelter and new vehicles, the indexes for recreation, for medical care, and for personal care increased in July. The index for used cars also increased in July, but the 0.2-percent advance was much smaller than in recent months. The index for motor vehicle insurance declined in July.

The all items index rose 5.4 percent for the 12 months ending July, the same increase as the period ending June. The index for all items less food and energy rose 4.3 percent over the last 12 months, while the energy index rose 23.8 percent. The food index increased 3.4 percent for the 12 months ending July, compared to a 2.4-percent rise for the period, the BLS said in its August 11 statement.

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