Carpe Diem

Even with baggage fees, the ‘miracle of flight’ remains a real bargain; average 2011 airfare was 40% below 1980 average

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Q: Especially considering all of the added baggage fees and other fees that airlines have been charging recently, is it more expensive or less expensive to travel by air today compared to ten years ago?

A: I think most people would answer “more expensive,” but they would be wrong. It was actually less expensive to travel by air in 2011 than in 2001, 2000, 1999 and every year before that back to 1979, see details below.

The top chart above shows average airfares in the U.S. (adjusted for inflation in 2011 dollars) for domestic travel on annual basis back to 1979 (the year that airlines and airfares were deregulated) based on data from Airlines for America, both with fees (blue line) and without fees (red line).  Even with fees that averaged $21.77 last year for: a) baggage ($12.77) and b) reservation change fees ($9.00), the average total fare of $365.23 in 2011 was more than 40% below the 1980 airfare peak of $611.76. Despite an increase in fares and fees that averaged $16.46 in 2011 and $26.29 in 2010 (from the all-time low fare in 2009 of $322.48), the average fare last year of $365.23 with fees was still slightly below the fare ten years ago in 2001 of $373.44, and 23.5% below the average fare 20 years ago of $477.11 and 39% below the average fare 30 years ago  of almost $600.  And considering that oil prices increased by an average of 29% in 2010 and almost another 20% in 2011, those increases in fuel costs dwarfed the small increases in airfares of 8% in 2010 and 5% in 2011.

The data from Airlines for America also reveal that the average number of miles flown per round-trip journey has increased by more than 20% over the last 30 years, from 1,947 miles in 1979 to an all-time high of 2,351 miles in 2011. Therefore, the inflation-adjusted cost-per-mile traveled has gone down even more than the 40% reduction in the average air fare since the peak in 1980. The bottom chart below shows the downward trend in real cost per mile traveled (including fees), and compared to 1980 ($0.323 per mile), the cost in 2011 was 52% cheaper ($0.155 per mile).  Note that driving the average trip distance of 2,351 miles by car would have taken about 40 hours of driving time, and would have cost about $330 for gas (at the average price of $3.50 per gallon in 2011, and assuming 25 miles per gallon), just slightly less than the average airfare of $365. Additional costs of driving would include toll charges, wear-and-tear on your vehicle, the costs of overnight stays at hotels during your 20 hour road-trip each way, etc.

As much as consumers like to complain about rising fees for baggage and other services, the “miracle of flight” is still close to the lowest cost in history, and air travelers today are getting a great bargain, especially compared to the airfares of the 1980s and 1990s and compared to the sharply rising costs for other services like college education and medical care.  Considering that the average flier today is saving about $150-200 per flight compared to the cost of flying during the 1980s, and is flying longer distances than ever before, those average baggage fees of $12.77 last year should seem like a real bargain.

Update: Airlines for America also provides annual operational and financial results for U.S. airlines back to 1948 (data here), here are a few interesting facts:

1. The “passenger load factor” (PLF) has been gradually increasing over time and has been above 80% for the last three years (2009-2011).  Ten years ago the PLF was 70% in 2001, twenty years ago it was 62.6% in 1991, and thirty years ago it was 58.6%.  There were a few years in the early 1970s when the PLF was below 50%.

That probably helps explain why the flying experience is less pleasant today than in the past – we no longer have the luxury of flying on planes with one-half or one-third of the seats empty.

2. U.S. airlines have been profitable in the last two years (2010 and 2011), but just barely – the profit margin in 2011 was just 0.8%, down from 2.1% in 2010.  Over the last 11 years, the industry has lost money in seven of those years, with losses totaling more than $84 billion. Airline were profitable in the year 2006, 2007, 2010 and 2011 and earned a total of $31 billion in those years, resulting in net losses of $53 billion for the industry from 2001-2011.

Bottom Line: The airline industry is extremely competitive and airlines as a group have only been able to earn positive profits in half of the years since 1981.  For the last two years airlines have been able to earn a small profit on very thin profit margins, and the higher PLFs and higher baggage fees have probably helped. The airline industry today is probably closer to a sustainable competitive model than in the past, when we got spoiled with free food and flying on planes with plenty of empty seats. Overall, consumers have reaped significant benefits from the deregulation of airlines in 1979, and have saved billions of dollars in lower fares.  Like any industry, the airline industry is evolving over time, and consumers have to adjust to the changes.

42 thoughts on “Even with baggage fees, the ‘miracle of flight’ remains a real bargain; average 2011 airfare was 40% below 1980 average

  1. It’s pretty much an economic rule that prices are correlated positively with the degree of government involvement. Look at college tuition and health care, for example. Both of these are areas that government is highly involved in subsidizing. Real prices there are rising, not falling as they do with airfares, phone service, etc.

    • Given the handsome subsidies given to the airline industry, including indemnification from liability for the 9/11 attacks (where they were at least partially responsible for resisting more stringent aviation security for many years), how do falling air fares square with your argument about subsidy?

  2. Those complaining about fees are inconsiderate idiots. Inconsiderate because they would make others pay for their extra baggage or their flight changes, idiots because they often don’t even realize that someone has to pay for their extra baggage or flight switches and if it isn’t them, it’s someone else. I wish these businesses would man up and try to explain some simple economics to these whining dullards, but most choose to retreat in the face of such self-righteous stupidity.

    • Still, it is interesting that the cost of air travel comes down but the cost of baggage is going up.

      Why would not BOTH be coming down?

      • Simple, they weren’t and probably still aren’t charging for the full cost of baggage. They charge $344 for a passenger with an average weight of 180 lbs or about $2/lb. The average weight of checked bags is probably around 50 lbs, so if you’re only paying $13 for baggage on average, it comes out to $0.26/lb. That’s one-tenth the cost. Now, the ticket price for the passenger is probably inflated a bit by a bunch of first-class/business tickets and the cost of in-flight service, but even if you cut it by 30%, that’s more than five times the cost of carrying baggage, pound for pound. What’s likely happening is that the airlines used to make everybody pay for the baggage hogs, by charging everybody the same price for decades regardless of how many bags you brought on (below the two-bag limit), but they’re starting to slowly separate out the baggage cost from the passenger cost, over the last five years or so. That’s probably driven by increased competition, how much easier it is to keep track of all the charges and fees using computerized systems, and just increased economic awareness overall.

        I’ve taken one flight trip in the last six years and all I took with me was a backpack. There’s no doubt that my high ticket price was subsidizing all the other passengers who were traveling with multiple checked bags, stuffed to the gills. I would gladly travel on an airline that charged me hundreds of dollars less and charged them more for their heavy bags. If they think that’s unfair, they’re retarded; what’s unfair is what is currently in place.

        • Excellent comment sprewell

          What people are seeing now a days compared to 20+ years ago is the itemized cost of flight travel…

          One should also remember that there are and always have been take-off and landing fees which are different from airport to airport…

          Security fees…

          Then there is something that is relatively new are the fuel surcharge fees one occassionally sees…

          In a sense we all see that in the almost daily fluctuations of gasoline/diesel prices…

          Most airlines are not immune from this situation either…

          IMO one of the major reasons flying is cheaper today is the technology that goes into the modern jet engine and modern avionics…

          The number of man hours needed to keep an aircraft flying today as compared to 20 and 30 years ago has dropped considerably…

          • juandos-

            the new engines make a considerable difference to be sure. but so did the forced renegotiation of union contracts in bankruptcies and the significant increase in the number of seats on any given airframe.

            if you get 10-20% more seats on a plane, fewer flight attendants and lower wages, and a drop in flight crew from 3 to 2 that’s going to matter too. planes are also flying a little bit more slowly to save fuel as well.

        • If you fly a charter ..say in Canada – where I have – they have a scales and you and your gear get on that scale and get weighed.. then the next person, etc. If the flight comes in overweight, you have to get rid of stuff and have it sent on a subsequent flight that often will charge by the pound.

          I would think that sooner or later, that’s what is going to happen with regular flights. The fatties will have to pay their fair share and if you want to carry on a crap-load of stuff, it will cost you.

          • Unlikely. Why embarrass the fatties by weighing them publicly and take the chance they don’t fly your airline again? That said, I have heard that airlines are increasingly making grossly obese people buy two tickets, so that the guy next to them doesn’t have to have their gut spill over into his seat. As for stuff, it’s already happened. They just need to keep raising the prices to really cover the freight, instead of continuing to subsidize part of the baggage cost with the regular ticket price, as they still do now.

          • That may happen one day, Larry. But today it would be a logistical mightmare to sell weight-based passenger tickets over all the available means of ticket distribution.

      • both are not coming down because of the internet. most tickets get booked on sites like travelocity. flights are listed in ascending order of price. so you want a cheap fare to get to the top of the list and then you hide the costs as “fees” to recoup.

        it has more to do with exploiting an inefficiency in the pricing data dissemination mechanism than anything else.

        • Somehow Southwest Airlines manages to get at the top of the list without charging bag fees. Amazingly, Southwest Airlines employees – the heaviest unionized of all the carriers – now have the highest wage rates in the industry.

          • Yes it is rather amazing isn’t it. Likewise for Allegiant, Jet Blue and AirTrans, the other discount carriers.
            If they can do it, why can’t the legacy airlines.
            Do you suppose it’s because of corporate greed rather than being satisfied with a ” reasonable ” profit instead of gouging.
            Furthermore I don’t know where the authors get their comparison figures from ? Ten to fifteen years ago I distinctly remember buying coast to coast round trip fares for $199
            Also before the proliferation of on-line websites, there were sites such as EasySabre where you could book and configure your own flights at cheaper than airline prices.

      • The cost of baggage isn’t going up, Larry.

        If you bought a dinner that included dessert for $30, and then at another time the same dinner that didn’t include dessert for $24 and added a $4 dessert, would you say the cost of eating was going down while the cost of dessert was going up?

      • Fuel cost accounts for almost all the cost of transporting baggage. Despite increases in engine efficiency, and reduction in aircraft weight, the fuel cost to transport baggage is higher than two or three decades ago.

        The cost to transport passengers includes much more than just fuel. Handling passengers – both before and during flight – requires much higher labor costs than does the handling of baggage. Passenger environment costs – both before and during flight – are also much higher. Legal costs, billing costs, insurance costs, logistics costs, reservation costs, and many more are all higher for passengers than for baggage.

        All those other costs can be controlled and managed by the airlines. The cost of fuel is pretty much beyond their control. The reduction in passenger costs – due chiefly to operating efficiencies in all areas of passenger airline operations – are responsible for the real reduction in air fares.

  3. Another way to judge the declining cost is the dress codes for plane travel. We have gone from business suit required in the 60′s to anything goes now.

    • aiken-

      but that is true of lots of things including going to work.

      we have just become a lot more casual as a society.

      i’m not sure you can draw meaningful conclusions about the price of air travel from it.

  4. A very anemic analysis. What about the costs of getting around once you arrive at your destination? What about all the time it takes to get to the airport, go through security, board the plane, de-board the plane, wait for your baggage (assuming it actually arrives), etc., at both ends of the trip? What about the differences in the amount of baggage you can even take? What about the joy of sitting next to (if not sitting underneath) a stranger of questionable hygiene and/or health? What about the pure joy of being strip searched and submitting to the groping hands of the state?

    Let’s not forget what a price actually is, and that there is a reason why value is subjective.

    • Well the next time you travel 2,300 miles round trip, feel free to spend 40 hours in your car driving instead of flying. Just the cost of gas will be about the sames as flying by air (for one person), and that doesn’t include any tolls, the wear-and-tear on your vehicle, meals on the road, possible hotel costs, etc.

      I’d trade 20 minutes going through security for 40 hours driving any day, as would most people.

      • Mr. Perry, as with many on this site, all I will say is you know the price of everything, and the value of nothing.

        Air travel today is an absolute HELL compared to what it was prior to (Jimmy Carter’s) deregulation, and sometimes, a race to the bottom, or a desire to reach the lowest common denominator, also has a cost to it. It may not be something you can see on a balance sheet or on the cost of a plane ticket- but I assure there is an intrinsic value, IN AND OF ITSELF, nonetheless.

        • Let’s be clear about two things:

          Airline deregulation was enacted during Jimmy Carter’s administration, but most of the groundwork was done during Gerald Ford’s years.

          The share of the population which travels by air has sharply increased since deregulation was enacted. U.S> revenue passenger miles per capita has about tripled since 1978. How would that be true if air travel were, as you put it, “an absolute hell”?

          • Pardon my error in the comment above. Total revenue passenger miles – not RPM per capita – have tripled.

          • Lies everywhere:

            “In 1970 and 1971, the Council of Economic Advisers in the Richard Nixon administration, along with the Antitrust Division of the Department of Justice and other agencies, proposed legislation to diminish price collusion and entry barriers in rail and truck transportation. While this initiative was in process in the Gerald Ford administration, the United States Senate Judiciary Committee, which had jurisdiction over antitrust law, began hearings on airline deregulation in 1975. Senator Ted Kennedy took the lead in these hearings.

            The committee was deemed a more friendly forum than what likely would have been the more appropriate venue, the Aviation Subcommittee of the Commerce Committee. The Gerald Ford administration supported the Judiciary Committee initiative.

            In 1977, President Jimmy Carter appointed Alfred E. Kahn, a professor of economics at Cornell University, to be chair of the CAB. A concerted push for the legislation had developed, drawing on leading economists, leading think tanks in Washington, a civil society coalition advocating the reform (patterned on a coalition earlier developed for the truck-and-rail-reform efforts), the head of the regulatory agency, Senate leadership, the Carter administration, and even some in the airline industry. This coalition swiftly gained legislative results in 1978.[citation needed]

            ——————————–

            What does one thing have to do with another? This is a classic example of “ergo hoc, ergo propter hoc.”

            Do you have any evidence of stagnation in the share of population traveling by air BEFORE deregulation?

            Yours is a perfect example of how people use these statistics to “prove” their points. You see this in the tax arguments all the time.

            Its nonsense.

            My point was we don’t live our lives so that everything in them is commoditized.

          • Yeah, Max. You know, I really do not appreciate being called a liar.

            I do not believe either of my statements are incorrect. I’ve been employed in the air transportation industry for the past 27 years. Some of my statements are based on market studies I’ve read at two different passenger airlines. Some of my statements are based on conversations I’ve had with airline veterans who were around back in those days.

            It is certainly possible my sources are incorrect. But I do believe they knew what they were talking about. Even if they were incorrect, they were not lying. And neither was I.

        • And for the hell that one pays it’s TSA crap, a sandwhich @ $7.50 or more, forget wine or beer and no more low ball airfares to get you to fly on the airline since competition between carriers is minimal. If you travel to an offbeat city like Mobile, Al or many others and are an infrequent traveler not on a business America Express voucher account please bring lots of KY jelly because your butt will scream from the reaming.

          Mark Perry it’s not 1980 anymore when pleasure travel was once per year to visit grandma. Keep in mind the study from which the original article was written was penned by an economist who needs lots of data to come to a conclusion. Heaven praise the economist who can crawl out of the library and is not an introvert can express himself confidently and see and smell what it’s like for 80% of the population.

          • Carlos ponchovilla IV: “since competition between carriers is minimal”

            Oh, I completely disagree. Competition between carriers on domestic routes is as strong as it has ever been. Now that almost all legacy carriers have shed their legacy labor costs, price competition is as rampant as it has ever been. Few other industries engage in the daily price wars the airline industry experiences. All the airlines employ dozens of revenue management and yield management professionals who fine-tune the competitiveness of their price offerrings.

            I think one of the main reasons the smaller markets no longer enjoy multiple carriers on many routes is that local governments can no longer afford the subsidies they once provided.

      • So, is your point that when it comes to traveling by air versus ground, anybody with different value judgments than yours is just stupid, or that this somehow justifies the silliness of the government’s intrusions into our civil liberties?

        • It’s not just Mark Perry’s values. Revenue passenger miles for U.S. origin-detination trips has just about tripled since 1978. Since 1978, vehicle miles driven has only doubled (1.5 trillion to 2.9 trillion). Of course, that’s not an apples to oranges comparison, as ground travel accounts for virtually all the trips under 100 miles.

          Where in anything Mark has written do you find any words which advocates government intrusions into our civil liberties?

          Do you want to know why government and not private enterprise is in charge of airport and airline security? It’s very simple: America’s unique tort system.

          • Quote from John Dewey: “Where in anything Mark has written do you find any words which advocates government intrusions into our civil liberties?”

            Quote from Mark Perry: “I’d trade 20 minutes going through security for 40 hours driving any day, as would most people.”

            Intrusions into civil liberties, no matter how benign, are still intrusions. Simply because the majority of people are unwilling to spend even more resourses, beyond the costs of the original intrusion, to fight these intrusions does not change this fact. This is the great state tool for slowly stealing and taking control of all activities. Those that fail to recognise it are the proverbial frog in the slowly boiling pot.

    • Thing is, Geoih, many of those things were around in the 80′s as well. I will grant you security is more stringent now, but traveling to the airport, boarding and de-bording the plane, waiting for baggage, and smelly co-fliers are nothing new. You’ll notice that the chart also includes baggage fees.

      So, the analysis holds. With the exception of security, the costs still hold.

  5. well, it’s not quite the same product, is it?

    you pay fees for bags. seats are smaller. you no longer get a meal in coach. the in flight movie is not free etc.

    that makes this comparison a bit tricky.

    i think that the real cost per mile chart ought to be using the “with fees” data as that is what is really being paid, but that still would not account for the loss of the meal and the smaller seats.

    sprewell-

    i’m not sure that analysis on bags really holds.

    weight is not the only consideration. space matters as well. bags can be packed quite tightly, far more so that a person. the volume in a plane devoted to a person could hold 6 or 8 bags. i’m sure weight is a factor, but it is not the only one. exactly how weight and volume trade off in terms of costs is not somehting i know, but i think that just looking at weight alone is too limited.

    • Bags Fly Free on Southwest Airlines. Southwest’s share of domestic passenger miles has been steadily increasing for about four decades now.

      Meals were never served on Southwest Airlines flights. I don’t think movies were ever shown.

      For Southwest Airlines customers, the product is the same. But it is improving. WiFi is now available on many Southwest flights, and will soon be available system-wide. Other in-flight entertainment options are soon to be rolled out.

      Seat pitch (the legroom) on each Southwest B737 has not changed in all of those decades. I don’t believe it has changed very much on other U.S. domestic aircraft. American Airlines did take out some seats and experimented with slightly larger pitch – and they lost their shirts doing so. Few airline customers were willing to pay more for larger seat pitch.

      Several times a year I evaluate the savings from very small weight reductions such as glass vs plastic wine bottles and leather vs vinyl seat covers. With today’s jet fuel costs, very small weight reductions can result in major savings for an airline.

    • morganovich,

      What aircraft did you fly which had greater seat pitches than the 31 in and 32 in which are standard for coach class in today’s narrow body aircraft? What period are you referring to? I’ve searched, but I cannot find any data indicating that the common aircraft used over the past 35 years had seat pitches greater than 32 in (Except for the experiment American tried a decade ago when they retrofitted hundreds of MD80s)

  6. As someone who actually flies for business, on a regular basis, I don’t buy this whole story. Stick all the pretty charts up you like but I know that ticket prices are running higher than they were, say in 2000 to 2005 time frame.

    Unless today’s dollar is worth 50 cents compared to 2005 dollars? Which would mean there’s been real and substantial inflation, which everybody says there is or isn’t or has or hasn’t been and when it’s done, all I know is what I actually have to pay for things.

    There’s no way around it, I’m paying more for airline tickets than I did. I don’t go visit family on other side of country nearly as often now, for that very reason. Of course a good part of that is also taxes (last tickets I bought two days ago, had $100 in taxes tacked on, and I know there’s more taxes hidden in the cost that the end user never clearly sees as “taxes”).

    Wave your arms in the air again and tell me “oh well, would you rather drive?”. But it doesn’t change the fact that air travel is a pain in the *** today, compared to what it used to be. Of course that doesn’t show up on a pretty little graph, does it? No way to “chart” that, is there? It’s not “economic data” so we should just ignore it, shouldn’t we?

    Anything that cannot be charted, economists are in general unable to see. “It’s not in my chart! It doesn’t exist!”

    Taxes on rental cars and hotel rooms have also shot up significantly over the past several years.

    There is, however, one place where I believe I’ve seen an actual cost drop, and that’s in international flights (mostly Europe when I go out of country). From what I’ve read that’s due to increased competition. Now, if only it was legal for non-US air carriers to fly US domestic routes. Then maybe we’d see real airfare costs drop.

    Just out of curiosity, how many of you here that are buying into this story, also actually buy <significant numbers of airline tickets in a year? I fly at least twice a month for work, often more. How many of your actually get to see what TSA puts people through, and has to deal with it themselves? Like, first hand experience and all?

    They show “polls” where “most” people think the TSA is a good thing. But the vast majority of those idiots rarely if ever fly. And none of them understands technology well enough to grasp the fact that all they’re getting is “Security Theater Live”.

    • Government is the cause for most of the problems you list, of course. And for many you do not list as well. Another cause is the legal system we do not have (loser pays).

      If airlines were responsible for ensuring the security of aircraft – and if they were allowed to use profiling – the security lines you have experienced would be gone.

      If airlines did not have to comply with outrageous directives from the FAA, travel would still be safe but costs would be much lower.

      If those who file suit for the merest inconvenience had to pay when they lose, the airline industry would be relieved of the burden of many millions of legal expenses.

      If the airline industry and not the FAA were in charge of air traffic control, the systems in use today would have long ago been modernized. Flight delays would be sharply reduced.

      The problems with the airline industry were not caused by deregulation, but rather by only partial deregulation.

  7. Someone mentioned crew size as a factor in the cost reduction shown in Mark’s graph. I don’t believe that was a major factor from 1980 on. The workhorse aircraft flying domestic routes in the 1980s – 737s, DC9/MD80s, 767s, A300s, A310s – all had 2 person crews. A small number of 3 crew 727s and DC10s were flying, but many of those had been sold to FedEx for cargo transport.

  8. There’s cost and then there’s value…. I’d rather stick a needle in my eye than choose to fly these days so what I gain in dollars I lose in the misery of the experience. The experience of flying has degraded terribly since the 80′s when I first began to fly regularly. If I possibly can I drive, I don’t care how cheap it gets.

  9. My general consensus of the article and the comments is that you can twist figures any way you want but the end result is that regardless of what these charts say, flying today is NOT cheaper than it was 10 to 20 years ago.
    I paid $199 for coast to coast round trip fares in that era and I got fed and treated well and didn’t have to put up with TSA jerks.
    Also didn’t have to put up with all these travel sites that do nothing other than make you choose from 5 different sources and generally just waste you time. Why not just find you the lowest fares available instead of jerking you around. Bring back EasySabre and let me book my own flights

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