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Domestic Air Fares Drop In First Quarter

Highest fare in Huntsville, lowest at Long Beach

By James Limbach
ConsumerAffairs.com

July 30, 2009

The average first-quarter fare of $315 was down 5.9 percent from the first quarter of 2008 and down 12.5 percent from the record high average fare of $360 in the third quarter of 2008. First quarter 2008 fares were also 9.4 percent below the pre-9/11 first quarter high of $348 in 2001.

The $315 first-quarter 2009 average fare represented a lower rate of increase than inflation both from the first quarter of 1995, the first year of BTS records and from the previous high for first-quarter fares set in 2001.

In the 15 years from 1995, air fares rose 6.1 percent compared with a 40.5 percent inflation rate. From 2001, when the previous first-quarter high was set, fares declined 9.4 percent compared with a 20.7 percent inflation rate.

Since 2005, average fares have risen less than the inflation rate. First-quarter 2009 average fares rose 4.5 percent from the post-9/11 first-quarter low of $301 in 2005; the inflation rate was 10.0 percent.

Of the top 100 airports based on 2008 originating passengers, the highest first-quarter average fares were in Huntsville, AL followed by Cincinnati, OH; Grand Rapids, MI; Savannah, GA; and Des Moines, IA.

The lowest fares in the top 100 airports were at Long Beach, CA followed by Oakland, CA; Burbank, CA; Dallas Love and Las Vegas.

The largest year-to-year average fare increase for the first quarter among the 100 largest airports ranked by originating passengers was 10.0 percent in Dallas Love followed by Houston Hobby; Lubbock, TX; Oklahoma City, OK and Memphis, TN.

The biggest year-to-year average decrease was 16.8 percent in Cincinnati, OH, followed by Madison, WI; Richmond, VA; Long Beach, CA and San Francisco.

A separate measure of fares, the BTS Air Travel Price Index dropped 8.5 percent in the first quarter of 2009 from its fourth quarter 2008 level.

Average fare calculations and the ATPI, while similar, measure air fares in two different ways and may produce different results. ATPI measures the rise in air fares, while average fares show the increased use of lower fares. The varying results reflect trends in the airline industry that have resulted in more passengers using lower air fares even though fare levels continue to rise. Three of these trends follow.

• First, low-cost carriers, which generally offer lower fares, now carry about 40 percent of all domestic enplaned passengers, up from about 14 percent in 1995.

• Second, network carriers have been forced to match some of the low-cost carrier relaxed fare rules, such as eliminating the "Saturday Night Stay Rule", which has allowed more passengers to purchase lower fares.

• Third, use of the Internet allows almost instant price comparisons that give the customer the opportunity for unprecedented low-fare shopping.

Excluding Alaska, Hawaii, and Puerto Rico, the largest year-to-year fare index increase for the first quarter among the 85 largest airline markets, ranked by passengers, was 3.7 percent in Islip, NY followed by Reno, NV; Ontario/San Bernardino, CA; San Diego, CA and Portland, OR.

The largest year-to-year ATPI decrease was 14.5 percent in Richmond, VA followed by Dayton, OH; Rochester, NY; Boston and Philadelphia.

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