With the price of jet fuel in freefall for month after month, travelers (and some members of Congress) have been ripping the airlines for their refusal to pass the savings along to consumers in the form of lower airfares.
Isn’t that the way the free marketplace is supposed to work, with competitive pressures inexorably forcing companies to keep their prices strictly aligned with their costs?
That the airline industry seems able to operate outside the fundamental rules of economics has spurred a swelling chorus of complaints and accusations, from gouging to collusion to strategic over-consolidation.
Meanwhile, back in the real world of travel, there’s a glimmer of hope for nickel-and-dimed flyers. In its latest Consumer Price Index report, issued this week, the Bureau Of Labor Statistics noted the following: “The index for airline fares declined sharply in July, falling 5.6 percent, its largest decline since December 1995.”
That’s for tickets purchased during July, most of which would be for travel in August or during the fall. But there’s a developing consensus that this is the start of a longer-term trend, not just a single-month’s aberration.
MarketWatch, for example, headlined its coverage of the report “Airline Tickets Are Cheaper and May Keep Falling.” And Investor’s Business Daily’s was “Airlines Slash Fares As Capacity Grows, Prices Near Limits.” Both publications suggested a link between the softening in the airline’s pricing and the ongoing Department of Justice investigation into collusion among the Big Four airlines to keep prices high.
Other likely factors contributing to the downward pressure on fares are the seasonal falloff in demand and the airlines’ recent increases in capacity, which tend to dilute pricing power.
It’s even been argued that the decline is illusory, because additional fees are offsetting any decrease in published fares. Although there may be some truth in that, fees alone aren’t likely to have increased enough to outpace the July drop in airfares.
It is, as they say, complicated. And it will take industry analysts and economists months to tease out the web of interrelated factors behind the pullback in prices. The takeaway for travel consumers is that, for whatever reasons, the industry seems to have reached a tipping point in ticket prices. And the new direction is down rather than up.
It may be time to dust off the rollaboards and check the expiration dates on your passports.
Reader Reality Check
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This article originally appeared on FrequentFlier.com.
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