Average Domestic Airfare of $391 is the Highest Since 1995

2015 Demand Is Expected to be High in Spite of Costs

Average Domestic Airfare of $391 is the Highest Since 1995
May 19, 2015

With fuel costs dropping, you might think that airline ticket costs would decrease as well. Think again. The latest information from the Bureau of Transportation Statistics (BTS) showed that the average domestic airfare in 2014 was $391 — a slight increase from the $382 average airfare of 2013. Even though the increase was slight, it was enough to make 2014 average airfares the highest since 1995, when the BTS started collecting and analyzing airfare data.

Lower fuel costs are indeed helping the airlines' bottom line. For example, the Q1 2015 profit reported by American Airlines hit a record $932 million, almost twice that of the same period last year. American acknowledges that much of the extra profit is from lower fuel costs. However, airfares are not driven so much by costs as by demand, and demand is still quite strong.

The recent TripBarometer study from TripAdvisor showed that 95% of US travelers intend to take a domestic flight during 2015, compared to the 92% that took one last year. An even greater increase is expected in international travel, with 67% of US travelers expecting to take an international flight in 2015 compared to the 50% that did so in 2014.

The airfare increases don’t look quite as bad when inflation is considered. The increase from 2013 to 2014 is only 0.6% in current dollars, and 2014 fares are far below the inflation-adjusted peak value of $467 in 2000. The years 1995-2003 (inclusive) all had inflation-adjusted average airfares above $400. Taken in context, this seems a bit more reasonable.

Looking for more good news? At first glance, the average airfare by quarters seems to be a good sign. The average airfare was lower in Q4 2014 than in Q3. Average fares by quarter last year were: $382.15 in Q1, $395.62 in Q2, 396.37 in Q3, and $392.66 in Q4. However, with inflation adjustment, the fares actually show a steady rise from $379.76 in Q1 to the current $392.66.

You may have localized good airfare news, depending on where you live. In several cities, the average flight cost in Q4 of 2014 was at least 5% less than in Q4 2013. These cities include Cleveland (dropping from $462 to $413), Washington, D.C. Dulles (from $509 to $462), Savannah/Hilton Head (from $484 to $441), Houston Bush (from $501 to $469) and Cincinnati (from $514 to $485).

Flying out of Dayton, Ohio, or Norfolk, Virginia? It's bad news for you. Dayton's average fare increased by over 15% last year (from $374 to $431) and Norfolk departures increased almost 13% (from $437 to $482).

Of the 100 busiest airports, the highest average airfare in 2014 was for flights originating out of Madison, Wisconsin, with an average fare of $505. The cheapest rates among that group were for flights out of Sanford, Florida, with an incredibly low average fare of $99.

Are you interested in information on your local airport or specific destination airports and how their average fares stack up to others? The total Q4 report is available as a PDF download from here: http://www.dot.gov/office-policy/aviation-policy/domestic-airline-consumer-airfare-report-4th-quarter-2014. Unless you’re an airline numbers junkie, there will be far more information than you want, but it is interesting to look over the local statistics and changes from the previous year.

Overall, things seem to be aligning to make 2015 another good year for airlines, especially those who can lock in reasonably low fuel rates. Demand should stay high, leading to another likely high watermark for average airfares in 2016.

Photo ©iStockphoto.com/Pixelci

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