Airfares: you get what you pay for

Last week, Sean O’Neill addressed the tricky nature of measuring changes in airfares. Air fare indexes pick up or decreases in base fares over time, but they don’t pick up “nickel and diming” (the addition of lots of charges for luggage, food, over-the-phone booking) or declines in service (cranky flight attendants, less legroom).

I’m on record as being in favor of price transparency. The regulation-era model of aviation ticketing assumed a monolithic travel market, like a Soviet-style clothing factory — one size fits all. There were few limitations on the ticket, a meal and a drink onboard, and room in the hold for three suitcases. Pre-deregulation experiments like the loosening of the Florida market demonstrated that the market is diverse. Some people are flying somewhere for a year and need all the luggage they can tow; others are flying for a weekend and are fine with a carry-on. Some people get very hungry in-flight; others eat beforehand. Some people may need to make changes at the last minute; others plan their schedules around their flights. One of the reasons average airfares went down by almost 40 percent in real terms from 1980 to 2005 was exactly that the cheapest tickets offered during this time were less flexible and included fewer amenities. Unbundling ancillary services from the basic cost of travel, many airlines have made it possible for low- and middle-income people to enjoy unprecedented access to air travel. You get what you pay for.

Now, as far as incorporating levels of service into the Bureau of Labor Statistics’s Consumer Price Index goes, Sean has some links worth checking out. Another way of measuring airfares is the Bureau of Transportation Statistics’s Air Travel Price Index. (For more on methodology differences, click here and here.) The ATPI measures discount fares, frequent flier mile awards, and package deals, whereas the CPI does not. (According to the ATPI, average airfares continue to fall — by 19 percent in inflation-adjusted terms from 2000 to 2007.)

Sean neglects to mention service improvements over time, especially in routing. Deregulation freed airlines from their patchwork routes, and the carriers organized themselves around hubs, collecting feeder traffic to national and international networks. Today, almost every airport in the country is only one stop away from almost every other airport in the country and from many major markets in Europe, Asia, and Latin America. Compare that to the convoluted route maps in the Airchive.

Increased transparency in air travel pricing is nothing to mourn. Moreover, one would be hard-pressed to argue that in the past thirty years, ancillary fees have gone up enough to compete with the inflation-adjusted reduction in average fares.

Airfares: Price hikes that go underreported [This Just In]

Photo credit: Flickr user alex-s. Used through a Creative Commons license.