US airline ticket prices are rising faster than inflation
The price of a domestic airline ticket increased 2.7 percent since last year, more than inflation. What's behind such high airline fares? Decreased competition, for one.
The days of cheap airline tickets are long behind us.
The average roundtrip domestic ticket reached $509.15 for the first half of this year, according to a recent study conducted by the Associated Press. That price is up almost $14 from last year, an increase of 2.7 percent. The cost of flying within the US is rising faster than inflation, which grew 2.1 percent lat year according to the Consumer Price Index (CPI)
"Airlines have reduced the number of seats while more people want to fly because of the economic recovery. All this leads to higher airfares," Chuck Thackston, managing director of data and analytics at Airlines Reporting Corp, told AP. "This trend in airfares is likely to continue for the near future, as the economy continues to grow."
In recent years the airline business has seen a lot of shakeups and mergers, which are decreasing competition for passengers. Last December, US Airways and American Airlines merged to create the world’s largest airline. Now American, Delta Airlines, Southwest Airlines, and United Airlines control 80 percent of the airline industry in the US.
During April, May, and June of this year, the four largest airlines made a combined $2.9 billion thanks to higher fares, more passengers per plane, and increased fees. The baggage fees, which were created to offset rising fuel costs, earned US airlines $3.3 billion a year. Oh, and those fuel prices? They're down 7.2 percent from last year to $2.96 a gallon.
The lack of competition in the market has allowed airlines to raise prices without the threat of being undercut. But there is a new wave of smaller airlines that are providing low cost fares for domestic flights. No-frills carriers like Spirit Airlines, whose stock ticker is SAVE, and Allegiant Air have grown in recent years, but they have yet to really gain a strong foothold in the market.
In addition to higher fares, many of the major airlines announced changes to their frequent flier programs this year. Delta Airlines and American Airlines both made major changes to their frequent flier programs. Starting in 2015, Delta will begin giving SkyMiles based on how much the ticket cost rather than how many miles were flown. American announced this year that tickets bought for the busiest travel days would increase to 50, 000 points, rather than 20,000 points during the majority of the year.
"Members have accumulated large quantities of miles that can be redeemed only at prices and on terms set by the airline, and increasing the [points] reduces the costs associated with redeeming miles. It improves [the airline's] bottom line,” Gary Leff, author of the blog "View from the Wing" and the founder of flyertalk.com, an online community for frequent fliers told the Monitor. "More miles are chasing fewer seats, and adjusting the award charts is one way for airlines to balance that."
So if you're looking for a cheap plane ticket, you might want to reconsider what you think of as cheap.