Airline fares fall sharply in August CPI

Airline fares fell sharply in the August Consumer Price Index (CPI) for All Urban Consumers, dropping 9.1 percent over the month following a scant 0.1 percent dip in July after rising sharply in the months leading into summer. August's airline fare decrease ran counter to the overall CPI, which increased 0.3 percent for the month on a seasonally adjusted basis, according to the Bureau of Labor Statistics.



Over the last 12 months, the index has risen 6.7 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 gasoline, household furnishings and operations, food, and shelter all rose in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0 percent, mainly due to a 2.8-percent increase in the gasoline index. The index for food rose 0.4 percent, with the indexes for food at home and food away from home both increasing 0.4 percent.

The index for all items less food and energy rose 0.1 percent in August, its smallest increase since February 2021. Along with the indexes for household operations and shelter, the indexes for new vehicles, recreation, and medical care also rose in August. The indexes for used cars and trucks, and motor vehicle insurance all declined over the month.

The all items index rose 5.3 percent for the 12 months ending August, a smaller increase than the 5.4- percent rise for the period ending July. The index for all items less food and energy rose 4.0 percent over the last 12 months, also a smaller increase than the period ending July. The energy index rose 25.0 percent over the last 12 months, and the food index increased 3.7 percent; both were larger than the increases for the 12-month period ending July, the BLS said in its Sept. 14 statement.

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