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Airfares Return to 1999 Levels: End to 'Lost Decade?'

July 29, 2010 By: George Dooley

News about increasing fare levels returning to 1999 levels should be kept in perspective, says the Air Transport Association (ATA) in response to the Department of Transportation (DOT) Bureau of Transportation Statistics’ (BTS) First Quarter 2010 new report on air fares. “Not only are the airlines nowhere near recovering from devastating losses, airfares have not come close to keeping pace with inflation,” the ATA said.

According to BTS data, the average first-quarter domestic one-way fare in 2010 (net of taxes and fees) was $154.91. While airfares are up from 2009, they have returned to 1999 levels, when the average one-way fare was $153.88. Compared to 2008 pre-recession levels, fares grew only 0.4 percent, easily trailing the 2.3 percent jump in the U.S. Consumer Price Index during that same period.

“Travelers certainly appreciate a bargain, and today’s airline customers are getting just that – a bargain. They continue to benefit from low airfares, especially considering the rising costs of food, energy and other goods purchased by U.S. consumers,” said ATA President and CEO James C. May. “For airlines to add jobs and develop new and improved service, it is critically important that they return to profitability.”

May noted that while airfares appear to be stabilizing, the airline industry has been in serious distress throughout the past “lost decade.” “This is a positive sign for recovery, not just in the airline sector but across the broader economy as well,” May said, further emphasizing that “today’s news about increasing fare levels should be kept in perspective; not only are the airlines nowhere near recovering from devastating losses, airfares have not come close to keeping pace with inflation.”

The analysis is based on average domestic one-way airfares from the DOT survey net of federal/local taxes and fees. ATA airline members and their affiliates transport more than 90 percent of all U.S. airline passenger and cargo traffic.

The DOT report said the average domestic air fares in the first quarter of 2010 increased to the second highest January-to-March level since 2001, rising 4.7 percent from the first quarter of 2009.

The $328 first-quarter 2010 average fares were down 8.3 percent from the all-time high, not inflation-adjusted, of $358 in the third quarter of 2008. Adjusted for inflation, first-quarter 2010 fares were down 25.0 percent from 1999, the inflation-adjusted high for any first-quarter since 1995. The first quarter 2010 average fares were up 8.9 percent from the post-9/11 fourth-quarter low of $301.39 in 2005. BTS air fare records reach back to 1995.

First quarter 2010 average fares were up 2.8 percent from the fourth quarter of 2009. Quarter-to-quarter changes may be affected by seasonal factors.

Air fares in the first quarter of 2010 declined 5.6 percent since the first quarter of 2001, compared to an overall increase in consumer prices of 23.5 percent during that period. In the 15 years from 1995, the first year of BTS records, air fares rose 10.5 percent compared to a 43.7 percent inflation rate. In 1995 dollars, the average air fare in the first quarter of 2010 was $228, compared to $297 in 1995 and $301 in 2000.

BTS reports average fares based on domestic itinerary fares, round-trip or one-way for which no return is purchased. Fares are based on the total ticket value which consists of the price charged by the airlines plus any additional taxes and fees levied by an outside entity at the time of purchase. Fares include only the price paid at the time of the ticket purchase and do not include other fees, such as baggage fees, paid at the airport or onboard the aircraft. Averages do not include frequent-flyer or "zero fares" or a few abnormally high reported fares.

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