US airfares decline; passenger costs, not so much

Plane spotting at LAX

The US Department of Transportation released its Q1 ’16 airfare data report today. In that report the Department’s Bureau of Transportation Statistics points out that fares have fallen, again, suggesting things are all good for consumers. But there’s more to the data than meets the eye, and it is not all so rosy.

The average domestic air fare decreased to $361 in the first quarter of 2016, down 7.8 percent from $392 in the first quarter of 2015, falling to the lowest level since 2010, adjusted for inflation.

In the same release the BTS also shared data on “Revenue from Passenger Fares as Percent of Total Scheduled Passenger Airline Operating Revenue,” a key factor given the rise of ancillary fees in the US market over the past decade. In 2000 airfare was 88.9% of the total passenger revenue for reporting airlines; that number dropped as low as 73.7% in 2009 and hovers just below 75% today. This suggests that historical airfare data should be adjusted not only for inflation but also for the proportion of costs those ancillary fees represent to come up with a better view of what the true impact to travelers is. Here’s what that graph looks like:

Comparing total costs versus juts airfare over time; data from US DOT BTS
Comparing total costs versus juts airfare over time; data from US DOT BTS

So, yes, passenger airfare is lower pretty much across the board. And even including ancillary costs the numbers are off their highs and down over the past five years. But not nearly as much as they would be without the ancillary costs. Added bonus for the airlines: Taxes are different on most passenger costs not included in the base airfare so the value proposition to the airline is even better than just the incremental revenue side of the equation. On the plus side for consumers, it does appear that the share of costs for ancillaries has steadied, at least for now.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.