Derek Thompson had an article last week in The Atlantic (“How Airline Ticket Prices Fell 50% in 30 Years (and Why Nobody Noticed)”) about the “incredible falling price of flying,” which has decreased by 50% over the last 30 years, after adjusting for inflation and the distance travelled. Derek links to this CD post from last October about falling airfares, and he features two CD charts from that post based on average airfare data through 2011 from Airlines for America. The two charts above are updated with data through Q3 2012, showing the following:
1. Adjusted for inflation in 2012 dollars, average airfares (without fees) increased last year (from January to September) to about $357, an increase of $6.40 from 2011, and the highest average airfare since 2001 (see brown line in top chart).
2. With fees, the average airfare last year increased by $7.24 from 2011 to $380.05, and that was the highest average fare since 2001 (see red line in chart).
3. Compared to the peak airfares above $622 in the early 1980s (in 2012 dollars), the cost of flying has come down by almost 40%, even with fees. The red line in the top chart shows the downward trend in airfares over the last 30 years.
4. The average miles flown per domestic round-trip journey increased last year to a record high 2,362 miles, see blue line in bottom chart. That represents a 25% increase in the average round-trip journey compared to the 1,894 mile average trip back in 1980.
5. Adjusted for the distance travelled, air passengers last year paid about 16 cents per mile with fees, and 15 cents per mile without fees. Those per-mile inflation-adjusted costs of air travel have basically been flat for the last decade and are less than half of the per-mile costs of air travel thirty years ago that exceeded 32 cents per mile in both 1980 and 1981.
Here’s Derek’s main point about falling airfares:
There are many sad stories to tell about the U.S. economy in the last 30 years, but here’s a happy story for everybody (except the airlines), from radical capitalists to the most liberal consumer advocates. Getting government out of the business of regulating the skies has led to a remarkable collapse in airline prices. If you want a two-word answer to why airfares have dropped so much since the 1970s, it’s this: Deregulation worked.
Derek almost makes the important point that:
Flyers hate fees. But we might learn to love them if we thought of them as savings.
It’s true that baggage fees reached a record high last year of $13.35, a ten-fold increase from the $1.27 average fee in 2005. But that’s an optional fee that can be avoided if passengers pack light and use carry-on luggage. Overall, the optional fees help keep the cost of a basic ticket as cheap as possible, and simply provide various options for different levels of service, which benefits fliers overall and provides savings for those travelers who elect to avoid them.
“Why do we hate fees if they keep basic prices low?” and provides an answer from John Heimlich, vice president and chief economist at Airlines for America, “It’s the American way to want a product approaching first-class for a price approaching zero.”
As I concluded in my post last fall, and it’s still the same today with updated 2012 data: “As much as consumers like to complain about rising baggage fees, 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 $250 per flight compared to the cost of flying during the early 1980s, and is flying longer distances than ever before, the average baggage fees of $13.35 in 2012 should seem like a real bargain.”
It’s also important to note that air travel is not only 50% cheaper than 30 years ago, but flying on a commercial airline has never been safer, see recent New York Times article “Airline Industry at Its Safest Since the Dawn of the Jet Age.”
Thanks to Derek Thompson for an excellent overview of how deregulation and market competition have benefited American consumers, saving them billions of dollars in travel costs, and in the process significantly elevated the standard of living of middle-class Americans.