The evolution of airfares, in one chart

October 13, 2012

Over at AEI's Web site, Mark Perry of the University of Michigan has a fascinating chart showing how airfares have evolved since 1979:

A few notes:

— Flying has gotten dramatically cheaper since the airline industry was deregulated in 1978. Proponents of deregulation say that's because there's more competition and the Civil Aeronautics Board is no longer determining routes and setting fees. Skeptics will counter that fares were dropping before deregulation and would have likely kept dropping anyway (thanks to technological improvements and the like).

— One reason that flying is getting cheaper, Perry notes, is that airlines have gotten much better at making more efficient use of their planes. In the 1970s, the average flight was about 60 percent full. By 2001, the average flight was about 70 percent full. In the past three years, the average flight was about 80 percent full. "That probably helps explain," Perry notes, "why the flying experience is less pleasant today than in the past."

— Oil matters here. Since 2005, airfares have begun to nudge upward again — the same period in which oil has been getting scarcer and more expensive worldwide. But airfares don't move in perfect lockstep with crude prices. The price of oil rose roughly 50 percent from 2009 to 2011 but airfares increased just 13 percent. Instead, fuel costs have been eating into airline profits.

— Speaking of which, it's still not very profitable to run an airline. Since 1979, the airline industry as a whole has lost $37.7 billion. Perry notes that the industry has lost money in seven of the past 11 years. The one exception is Southwest, which has turned a profit for 39 straight years — here's an explainer from Seth Stevenson* on how they managed that.

— Baggage and reservation change fees have been soaring in recent years, but flying is still cheaper than it was a decade ago, on average. Perry notes that baggage and change fees averaged $21.77 per flight last year, but the average domestic round-trip flight is still cheaper than it was in the 1990s.

— Note that this chart just looks at the average round-trip domestic flight. There's a fair bit of variation around the country. Some mid-sized cities such as Cincinnati, Pittsburgh and Memphis have seen airlines scale back operations or close hubs, which has driven up airfares to and from those cities quite a bit. See this old post for a debate on whether policymakers should worry more about older industrial cities that “are increasingly cut off from each other and from the global economy.”

In any case, there's a lot more in Perry's post, which is worth reading in full.

Related: Should we worry about cities abandoned by airlines?

* Correction: Seth Stevenson wrote the piece on Southwest Airlines.

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Sarah Kliff · October 13, 2012