Categorized | Airlines

Airfares down 16% since 1995, WSJ reports…

Posted on 07 October 2011

 

A Swiss International Air Lines Airbus Industrie A340-300 airplane makes its final approach as it lands at Miami International Airport.
 

Airfares may be on the rise when compared to their levels during the previous two years, but – over the long haul – the relative price we pay for air travel is in decline.

 

So says The Wall Street Journal, where reporter Susan Carey writes:

Average domestic airfares, adjusted for inflation, have fallen 16% since 1995, according to the Transportation Department. A round-trip ticket that in 1995 would have cost $410.30 (in 2010 dollars), including nominal bag and reservations fees, now goes for $337.97, and that includes $21.66 in bag and reservations charges, the DOT says. Stripping out those fees, the current fare is down an inflation-adjusted 21% from 1995.

 

A recent spate of mergers – coupled with capacity constraint that’s rarely seen in the industry – have helped airlines limit supply and nudge fares higher during the past year-and-a-half. Still, the broader decline in fares during the past two decades has left carriers scrambling for new ways to generate revenue – such as the myriad “a la carte” fees introduced since 2008.

 

And competition has remained intense on many routes, which has helped to keep fares at least partially in check.

 

To illustrate the industry’s challenge in raising overall fares, the Journal’s Carey notes “even with $1,000 coach tickets to Asia in its portfolio and $5,000 business-class flights to Europe, United Continental’s second-quarter average fare – revenue divided by number of passengers, excluding taxes paid by those passengers – was $273″ or $546 round trip.

 

Darin Lee, an aviation economist at consulting firm Compass Lexecon, tells Carey “there is no significant change in the secular, long-term cycle of prices — which is, they are going down. If airlines had pricing power, they wouldn’t be rushing to buy more fuel-efficient planes and trying to eke out every little efficiency.”

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