Airline fares post modest decline in October CPI

Airline fares continued to decline in October, down 0.7 percent after decreases of 6.4 percent in September and 9.1 percent in August, according to the Consumer Price Index (CPI) for All Urban Consumers. October's airline fare drop ran counter to the overall CPI, which rose 0.4 percent for the month on a seasonally adjusted basis after an increase of 0.4 percent in September, according to the Bureau of Labor Statistics.

Over the last 12 months, the index for airline fares has declined a net 4.6 percent, making it the one major component of the CPI to decline over the past year.

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 February 2020 United raised its fees for checked bags from $30 to $35 for the first bag, and from $40 to $45 for the second. jetBlue (NASDAQ:JBLU) quickly followed suit, while American and Delta held fast at $30 for the first bag and $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 energy index rose 4.8 percent over the month, as the gasoline index increased 6.1 percent and the other major energy component indexes also rose. The food index increased 0.9 percent as the index for food at home rose 1.0 percent.

The index for all items less food and energy rose 0.6 percent in October after increasing 0.2 percent in September. Most component indexes increased over the month. Along with shelter, used cars and trucks, and new vehicles, the indexes for medical care, for household furnishing and operations, and for recreation all increased in October. Airlines fares and alcoholic beverages were among the few to decline over the month.

The all items index rose 6.2 percent for the 12 months ending October, the largest 12-month increase since the period ending November 1990. The index for all items less food and energy rose 4.6 percent over the last 12 months, the largest 12-month increase since the period ending August 1991. The energy index rose 30.0 percent over the last 12 months, and the food index increased 5.3 percent, the BLS said in its Nov. 10 statement.

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