Airfares fall again, but some suggest increases may lie ahead
Airfares dropped again in the first three months of the year, declining to their lowest first-quarter average since tracking began 22 years ago.
But after two years of decreases, travelers may need to brace for higher fares in 2018.
The average domestic fare in the U.S. was $352 in the first quarter of 2017, a 5% drop from the same quarter last year, the U.S. Bureau of Transportation Statistics reported Tuesday.
When adjusted for inflation, the first-quarter fare is the lowest for that period since the federal agency began to keep track of the data starting in 1995.
Industry experts have attributed the declining fares to lower fuel costs and efforts by traditional carriers to squeeze more passengers onto planes by reducing legroom for economy-class fliers. Competition from low-cost carriers such as Spirit and Frontier airlines also is a factor.
Jan Brueckner, an economics professor at UC Irvine, noted that major carriers have launched bare-bones economy fares to compete with low-cost carriers.
“A lot of people are buying them,” he said.
Airfares have been on the decline since 2014, when the average domestic ticket price was $403. In the following year, the average fare dropped to $387, then to $354 last year, according to the Bureau of Transportation Statistics.
But it is not clear how long the decline in prices will last. A study by a travel management company and a trade group for business travel managers has predicted that airfares will rise 2.3% in North America next year because of rising fuel costs and growing demand.
The federal data analyzes only airfares and doesn’t include passenger fees, such as luggage-checking fees and charges for food, drinks, onboard entertainment and upgrades to roomier seats. Such fees have become a growing source of revenue for the airline industry.
During the first quarter of this year, U.S.-based airlines collected 74% of their total revenue from fares, with the rest coming from passenger fees and other charges. In the same period in 1995, airlines drew about 88% of their revenue from airfares, according to the Bureau of Transportation Statistics.
Despite the lower fares, many passengers are not happy with the service offered by the major carriers, said Paul Hudson, president of the passenger rights group Flyersrights.org.
He noted that complaints against U.S. carriers jumped 70% in April — the same month a viral video showed a United Airlines passenger getting dragged from his seat after he refused to give it up.
The passenger, Dr. David Dao, later reached a settlement with United over injuries he suffered in the fracas.
Hudson said that debacle and other onboard incidents that have become online sensations show that many airlines are only focused on boosting profits and not on the treatment of their passengers.
“Since the Dao video and other viral videos, a lot of people who didn’t know you could complain to the Department of Transportation were made aware,” he said. “Others who thought there was no point in complaining are now coming forward.”
The airline industry has benefited from a steep decline in fuel costs over the last three years. A gallon of jet fuel last month cost $1.30, down 54% from $2.84 in summer 2014, according to the U.S. Energy Information Administration.
In the first quarter of 2017, U.S.-based airlines reported $1.9 billion in net profit, down from $2 billion in the previous quarter and from $3.1 billion in the first quarter of 2016, according to the Bureau of Transportation Statistics.
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UPDATES:
2:45 p.m.: This article was updated with additional analysis.
This article was originally published at 10:25 a.m.
