- Taking inflation into account, airfares are much more affordable than they were nearly 30 years ago.
- But many Americans remain frustrated by airfares.
- BI asked experts why inflation-adjusted airfares have fallen, and why some people haven’t noticed.
The last time you bought a plane ticket, you probably got a better deal than you thought you would. That’s because, believe it or not, airfares are a lot more affordable than they were 30 years ago.
According to the Bureau of Transportation Statistics, the average U.S. domestic airfare in 1995 was $292, excluding optional fees such as baggage-related fees. The average fare in 2023 will be $382, up more than 30% from 1995. However, when adjusted for inflation, the picture changes dramatically. In 2023 dollars, the average airfare will fall from $584 to $382 between 1995 and 2023, a decrease of about 35%.
That means that, like the prices of TVs and toys, flying has become much more affordable than it used to be.But ask any American and they’ll tell you that airfares have gotten out of control in recent years.
“I have little doubt that people believe airfares have reached an all-time high and are continuing to rise,” Scott Keyes, an airline industry expert and founder of travel membership service Going.com, told Business Insider in an email. “We’re living in the golden age of cheap airfare, but few people realize it.”
Additionally, Deloitte transportation expert Mike Daher wrote in a May report that “perceptions of rising airfare and hotel prices are leading some Americans to forego travel this summer in search of cheaper fares.”
It’s not just domestic flights that have gotten cheaper: International airfares for American passengers have also fallen overall over the past decade, after adjusting for inflation, Keyes said.
Frustration over the cost of flying may be one reason the percentage of Americans who have a negative opinion of the airline industry is at its highest level since 2011, according to a Gallup survey of more than 1,000 U.S. adults. The study was conducted last August. The federal government appears to be taking notice. In January, a federal judge blocked the merger of JetBlue and Spirit Airlines after the Biden administration raised concerns about the impact on airfares. In April, the Department of Transportation announced rules it said would protect consumers from “unexpected junk fees” like the cost of extra bags or changing reservations. It will save passengers more than $500 million annually.
To be sure, complaints about airfares haven’t stopped many Americans from flying: As pandemic restrictions eased, Americans unleashed pent-up travel demand on the airline industry. And the momentum continues: On May 24, TSA officers screened nearly 3 million passengers, a record number.
Still, the overall decline in actual airfares over the past two years indicates that passenger demand “seems to have calmed down a bit,” Kelly Tang, an economics professor at Loyola University Maryland, told BI in an email. He said this indicates demand may be normalizing, and that some Americans are balking at higher airfares in 2022, even though inflation-adjusted tickets are still more affordable than pre-pandemic levels.
Going forward, airlines will continue to be influenced by Americans’ perceptions of airfares, which in turn influence Americans’ broader feelings about inflation and the economy, which could have an impact on this fall’s presidential election.
Business Insider spoke with airline industry experts to find out why inflation-adjusted airfares have fallen over the past 20 years and why some Americans aren’t aware of it.
Why airfare has become more affordable
Aviation industry experts told BI that one of the biggest factors driving down airfares when adjusted for inflation is the rise of low-cost budget airlines.
In 2000, United, American, and Delta flights carried 73% of passengers on US domestic flights, according to an analysis of Department of Transportation data by industry group Airlines for America. By 2023, their passenger share had fallen to 52%, due to the rise of low-cost carriers like Southwest, JetBlue, Spirit, and Frontier.
This development has led to cheaper airfares through what airline industry insiders call the “Southwest Effect.”
“Researchers have studied airfares and found that when a low-cost carrier like Southwest or Spirit begins serving a new route, fares fall by an average of 20 percent for all airlines serving that route,” Keys says. “This is because price is by far the most important factor in leisure travelers’ purchasing decisions, so competition from new airlines, especially low-cost carriers, lowers fares across the board.”
Another factor driving down fares is “the increase in the number and size of aircraft,” Keys said.
In addition to expanding their fleets, airlines have been retiring smaller planes and replacing them with larger ones over the past few decades. In 2005, 11% of commercial aircraft had 151 seats or more; by 2023, that number will be 48%.
“Larger planes, improved fuel efficiency and more seats mean that airlines are lowering their overall flying costs and passing those savings on to travelers,” Keyes said.
Despite competition from cheaper airlines and the resulting declines in inflation-adjusted fares, airlines such as United Airlines, American Airlines and Delta Air Lines have not been hurt financially.
“The decline in inflation-adjusted airfares appears to be unrelated to the performance of the ‘big three’ airlines,” Tan said.
Keys said 2015 through 2019 were “among the most profitable years ever” for U.S. airlines. He said falling inflation-adjusted fares haven’t hurt airline profits because airlines’ business models are less reliant on ticket revenues than they once were.
“Currently, airline revenue comes primarily from sources other than economy class tickets,” he said. “This includes premium cabin revenue, credit card, business travel, ancillary fees, cargo and other sources.”
Why Americans don’t feel they’re getting a good deal on airfare
If airfares are more affordable than they used to be, there are a number of reasons why Americans remain dissatisfied.
“Consumers are not necessarily thinking about inflation-adjusted airfares, so their dissatisfaction may be due to nominal price increases,” Tan said. “It’s also possible that a slight increase in flight delays since the COVID-19 pandemic has made travellers more dissatisfied with their travel experience.”
After airfares plummeted during the pandemic, the sudden rise in airfares in 2022 may have caught Americans off guard: In September 2022, airfares rose about 43% compared to the previous year, the highest increase on record.
Moreover, airfare isn’t the only cost of flying. Many passengers also pay fees for things like excess baggage and seat selection. These fees can be added on much later in the booking process, something the Biden administration is trying to crack down on. A YouGov survey conducted last July found that 44% of Americans said that at least sometimes an airfare is more expensive than the price initially quoted. This year, United, American and Delta each increased their checked baggage fees.
But while those fees may be pricey for some customers, they don’t do much to offset the decline in airfares adjusted for inflation, Keyes said. Including baggage and rebooking fees, the average price of a round-trip U.S. ticket in 2023 was $406, according to an analysis by Airlines for America. Since 2010, 2020 and 2021 were the only years that saw more affordable flights, and much of that was due to pandemic-related declines in demand.
too Perhaps rising prices of goods and services across the U.S. economy mean Americans have less money to spend on airfare, making plane tickets feel especially expensive. The uncertainty surrounding travel plans means some are only booking flights a few weeks in advance, a pandemic habit. “If you’re looking to save money on airfare, you should book at least a month in advance,” Haley Berg, chief economist at Hopper, told NerdWallet. She recommended booking at least a month in advance to get the best deals on airfare.
For some Americans, plane tickets are among the most expensive purchases they make on a semi-regular basis, making them especially sensitive to price increases, while others fly so rarely that decades of fluctuations in inflation-adjusted prices may be hard to notice.
Finally, unpredictable fluctuations in airfares may frustrate consumers, Keyes said, and it’s not uncommon for Americans to harbor negative feelings about travel costs and other economic issues that don’t match the data.
“Airfares are one of the most disruptive and volatile purchases we make every day,” he said. “Add in negativity bias and it’s not surprising that people are more likely to believe airfares are at an all-time high when in fact they’re at an all-time low.”
Have you found any creative ways to save money on travel and flights? Want to share your experience? If so, please contact this reporter. jzinkula@businessinsider.com.
