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BTS Announces New Air Travel Price Index

BTS Announces New Air Travel Price Index

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BTS 06-04
Dave Smallen
202-366-5568

Wednesday, March 31, 2004 - The U.S. Department of Transportation's Bureau of Transportation Statistics (BTS) today announced a new tool to provide the public with additional information about trends in the price of air travel.

Currently experimental, the new Air Travel Price Index (ATPI) produced by BTS shows that airline ticket prices for itineraries beginning in the United States declined 3.2 percent from the third quarter of 2000 to the same period in 2003 (Table 1). In the third quarter of 2000 it reached the highest level of any third quarter since the base period in 1995 (Table 2). The ATPI will provide a quarterly measure of changes in airfares since the first quarter of 1995.

In addition, third-quarter 2003 airfares fell 0.2 percent from the second quarter. Quarter-to-quarter changes may be affected by seasonal factors (Table 3).

The third-quarter 2003 index was 2.1 percent higher than the same period the previous year, reaching the highest level third-quarter level since 2001. The increase was the first third-quarter-to-third-quarter rise since 2000, when fares were higher than a year earlier (Table 2).

The ATPI series are computed using price index methodology similar to that used by other federal statistical agencies. Although the ATPI is computed using a tested index methodology, the effective application of this methodology to the airlines' data is still under development and is considered a research series at this time.

Additional information about the ATPI, including indexes for foreign-origin itineraries and selected individual cities, can be found on the BTS website, www.bts.gov. The fourth quarter 2003 ATPI will be released in May.

Table 1: Percent Changes for U.S.-origin flights from Previous Years to 2003

Third Quarter to Third Quarter

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Percent change to 3rd Quarter 2003 Since . . . Duration
2.1 2002 One Year
-0.5 2001 Two Years
-3.2 2000 Three Years
5.1 1999 Four Years
6.1 1998 Five Years
3.3 1997 Six Years
7.3 1996 Seven Years
5.2 1995 Eight Years

SOURCE: BTS, 2004

Table 2: Third Quarter ATPI - U.S.-origin (First Quarter 1995 = 100)

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  ATPI Percent change from previous year
1995 100.36  
1996 98.36 -2.0
1997 102.19 3.9
1998 99.48 -2.7
1999 100.44 1.0
2000 108.98 8.5
2001 106.05 -2.7
2002 103.39 -2.5
2003 105.53 2.1

SOURCE: BTS, 2004

Table 3: Quarter-to-Quarter Change in ATPI for Five Quarters for U.S.-origin Itineraries (First Quarter 1995 = 100) Quarter-to-quarter changes may be affected by seasonal factors.

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  ATPI Percent change from previous quarter
2002 - 3rd Quarter 103.39 -2.82
2002 - 4th Quarter 104.73 1.29
2003 - 1st Quarter 107.98 3.11
2003 - 2nd Quarter 105.79 -2.02
2003 - 3rd Quarter 105.53 -0.25

SOURCE: BTS, 2004

Brief Explanation of the ATPI

The ATPI is based on fares paid by travelers and draws its data from the BTS Passenger Origin and Destination Survey. Through this survey, BTS collects information from the airlines on a 10 percent sample of airline tickets. Each ticket sold is assigned an identification number, and if this number ends in 0, the ticket is in the sample.

The index measures the aggregate change in the cost of itineraries originating in the United States, whether the destinations are domestic or international, but only for U.S. carriers (excluding charter air travel). The ATPI is based on the changes in the price of individual itineraries, that is, round trips or one-way trips for which no return trip is purchased, and the relative value of each itinerary, for the set of matched itineraries.

The index uses the first quarter of 1995 as the reference point (expressed as the number 100) against which all subsequent quarterly prices are measured. ATPI values below 100 represent overall "cost of flying" levels less than those in the first quarter of 1995, while values above 100 represent cost of flying levels that exceed those of the first quarter of 1995. ATPI levels can be used to compute percentage changes in overall fare costs between any two quarters in an ATPI series.

Unlike many other price index estimates, the ATPI is not based on a fixed "market basket" of air travel services. Rather, all of the data from the Passenger Origin and Destination (O&D) Survey are fed into the estimation system each quarter, and this collection of itineraries varies from one quarter to the next. New entry, including routes and carriers, will not be included in the ATPI calculations until it has been present in the O&D Survey for two consecutive quarters.

The ATPI differs from the Bureau of Labor Statistics' (BLS) airfare index, a component of the Consumer Price Index. The BLS index is based on fares advertised through SABRE, a leading computerized airline ticket reservation system, while the ATPI uses actual fares paid by travelers. Since a growing number of tickets are purchased through the internet at discounted prices not listed with SABRE, the ATPI does not show the same levels of increases as the BLS index.

For price comparison purposes, itineraries flown in each quarter are "matched up" with very similar itineraries flown in other quarters. A price index formula is then used to compute aggregate index estimates such as those that appear in this release.

The fares reported in the O&D Survey include taxes, so the ATPI values reflect changes in tax rates as well as changes in fares received by the airlines. The ATPI values in this release are not adjusted for seasonality, so some movements in the series are due to seasonal variations in airfares.