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BTS: Average domestic air fare decreased 6.1 percent in Q4 2016

The average domestic air fare decreased to $347 in the fourth quarter of 2016, down 6.1 percent from $369 in the fourth quarter of 2015, adjusted for inflation, the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) reported today.

BTS reports average fares based on domestic itinerary fares. Itinerary fares consist of round-trip fares, unless the customer does not purchase a return trip. In that case, the one-way fare is included. One-way trips accounted for 36 percent of fares calculated for the fourth quarter of 2016. The average unadjusted domestic one-way air fare was $241 in the fourth quarter of 2016, while the average unadjusted round-trip air fare was $422. Fares are based on the total ticket value, which consists of the price charged by the airlines plus any additional taxes and fees levied by an outside entity at the time of purchase. Fares include only the price paid at the time of the ticket purchase and do not include fees for optional services, such as baggage fees. Averages do not include frequent-flyer or “zero fares.” Constant 2016 dollars are used for inflation adjustment.

Inflation-Adjusted Air Fares

Fourth-quarter fares were the lowest fourth-quarter fares since BTS began reporting fares in 1995, down 3.0 percent from the previous low of $357 in 2009. They were the lowest for any quarter since $344 in the third quarter of 2009.

The fourth-quarter 2016 fare was down 26.5 percent from the average fare of $472 in 2000, the highest inflation-adjusted fourth quarter average fare recorded in the 21 years since BTS began collecting air fare records in 1995. Since 1995, inflation-adjusted fares declined 23.4 percent.

In recent years, airlines have obtained additional revenue from fees charged to passengers, as well as from other sources. U.S. passenger airlines collected 74.7 percent of their total revenue from passenger fares during the third quarter of 2016, down from 87.6 percent in 1995. Third-quarter data are the most recent available.

Quarter-to-Quarter Change

The fourth-quarter 2016 average fare of $347 was down 13.7 percent from the recent peak of $402 in the fourth quarter of 2014.

Annual Fares

The average 2016 inflation-adjusted fare of $349 was down 8.5 percent from $382 in 2015. The 2016 average was lowest since 2009 and was down 26.1 percent from the all-time annual high of $472 in 2000. Unadjusted, the 2016 average fare of $349 was up 12.5 percent from the post-recession low of $310 in 2009 but down 10.9 percent from the recent peak of $392 in 2014.

Unadjusted Air Fares

The $347 fourth-quarter 2016 average fare was down 12.5 percent from the third quarter 2014 fare of $396, which was the highest unadjusted average fare for any quarter since 1995. Since 1995, unadjusted fares rose 20.5 percent compared to a 57.2 percent increase in overall consumer prices.

Fourth-quarter 2016 fares were up slightly, 0.8 percent, from the third-quarter 2016, the first quarter-to-quarter increase since the third-quarter of 2014. From that quarter until the third quarter of 2016, fares declined by 13.2 percent.