Air Travel Price Index

Air Travel Price Index

Commercial airlines offer a variety of discount fares to fill their flights, but these special airfares, facilitated by Internet commerce and “frequent flyer” programs, complicate efforts to measure changes in the prices people pay for commercial air travel. To improve these measurements, the Bureau of Transportation Statistics (BTS) in consultation with the Bureau of Labor Statistics (BLS) developed an Air Travel Price Index (ATPI) (box 6-A).

ATPI research data can be used to compare changes in prices among many cities. In a comparison of three medium-size cities, for instance, a dip appears between 1995 and 1998 for flights originating in Colorado Springs, Colorado (figure 6-7). During this time, the discount carrier Western Pacific operated flights from Colorado Springs, and the figure shows the effect it had on bringing airfares down before it withdrew from the market. The ATPI can be used to compare prices for international travel as well. Third quarter spikes in a comparison of travel originating in Frankfurt, London, and Tokyo indicate that a high percentage of passengers traveling to the United States from these cities pay peak fares July through September (figure 6-8). These types of specific domestic and foreign points of origin comparisons are possible because of the sample size on which the index is based.

A comparison of the ATPI with the official BLS Airline Fare Index shows how they differ (figure 6-9). The BLS index covers only itineraries ­originating in the United States and is most comparable to the ATPI “U.S. Origin Only” series. However, these two indexes give different results. Between fourth quarter 1998 and the end of 2003, the “U.S. Origin Only” ATPI increased 7.3 percent, while the BLS index increased 12.4 percent. This difference is probably due mainly to the type of target formulas used,1 and the survey’s inclusion of special discount fares that involve differential pricing (e.g., frequent flier awards and Internet discounts) combined with consumers’ increasing use of these discount tickets during this period. The “U.S. Orgin Only” ATPI also shows a sharper drop in the last two quarters of 2001—a more pronounced “9/11 effect”—than it does in the BLS index, which is the official U.S. Consumer Price Index. The ATPI covering all origins increased 7.3 percent between fourth quarter 1998 and the end of 2003. Decreasing fares for flights from foreign points of origin cause the “all origins” index to run below the BLS index for most of the years shown.

1 Since the fourth quarter of 1998, BLS has based its index on the hybrid Jevons/Modified Laspeyres formula. In prior years, the BLS index was based on the Modified Laspeyes formula. The BTS ATPI is computed using the Fisher Index formula.