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Air Fares
What is the Air Travel
Price Index?
The Air Travel Price
Index is a quarterly measure of change in airfares since the first
quarter of 1995. The index is based on fares paid by travelers and
draws its data from the Passenger Origin and Destination (O&D)
Survey. Through this survey, BTS collects information from the
airlines on a 10% sample of airline tickets. Because of changes in
O&D Survey reporting procedures during 1997 and 1998, some ATPI
series may show spurious changes during this
period.
What does the Air Travel
Price Index measure?
The index measures
change in the cost of air travel (excluding charter air travel) from
the base period, the first quarter of 1995. Only prices charged by
domestic carriers are covered in the index. There are three primary
ATPI series:
- The Domestic Origin
ATPI measures change in the cost of itineraries originating in the
United
States, whether the
destinations are domestic or international.
- The Foreign Origin ATPI
measures change in the cost of itineraries with a foreign origin
and a U.S. destination.
- The Full-Scope ATPI
combines the Domestic and Foreign-Origin itineraries.
Does the Air Travel
Price Index show how much travelers pay for air
travel?
No. The index reflects
only the quarterly change in cost measured against the first quarter
1995 base.
How is the Air Travel
Price Index used?
The ATPI is used to
track changes in the prices paid for air travel. The three primary
ATPI series (see Question 2 above) allow examination of national and
international trends in airfares. The city level indexes permit
analysis of the effects of local airline industry developments
including new carrier entrants, the departure or downsizing of
established carriers, changes in airline marketing plans or pricing
structures, and movements in the local economy. The ATPI values in
this release are not adjusted for seasonality, so some movements in
the series are due to seasonal variations in
airfares.
What airline flights
does the Air Travel Price Index cover?
The ATPI is based on
changes in the price of itineraries, that is, round trips or one-way
trips for which no return trip is purchased. The Full-Scope ATPI
covers all itineraries that include at least one stop at a
U.S.
airport.
How do I read or
interpret an Air Travel Price Index value?
Think of the ATPI as a yardstick against which fluctuations in commercial air travel prices are measured. 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. Through relatively simple calculations, we can use the ATPI levels to compute percentage changes in overall fare costs between any two quarters in an ATPI series.
Example: Suppose we wish to know the percentage change in overall fare levels for itineraries originating in the New York metropolitan area between the second quarter of 2001 and the second quarter of 2002. The ATPI value for the second quarter of 2001 is 120.15, and the value for the second quarter of 2002 is 113.04. Thus we may compute the percentage change as follows:
Difference in ATPI Values from Quarter
2, 2001 to Quarter 2, 2002: 113.04 – 120.15 = –7.11.
Proportionate Difference from Quarter 2, 2001 to Quarter 2,
2002: –7.11/120.15 = –0.0592.
Percentage Difference from
Quarter 2, 2001 to Quarter 2, 2002: –0.0592 X 100% = –5.92%.
We therefore conclude that the overall cost of flying out of
the New
York metropolitan area
decreased by about 5.92% between the second quarter of 2001 and the
second quarter of 2002.
How are the Air Travel Price Index fare data
collected and reviewed?
The Bureau of
Transportation Statistics receives data from the airlines on a 10%
sample of itineraries flown. Each ticket sold is assigned an
identification number, and if this number ends in 0, the ticket is
in the sample. The reported data include fare, itinerary information
(sequence of airports), class of service, and other characteristics
of the ticket. BTS’ aviation information specialists review the data
for quality and accuracy before they are used in ATPI computations.
For more information, see the Technical
Notes.
How is the Air Travel
Price Index calculated?
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. For price comparison purposes, itineraries
flown in each quarter are "matched up” with very similar itineraries
flown in other quarters. A Fisher index formula is then used to
compute aggregate index estimates such as those that appear in this
release. For more information on the estimation method, see the Technical
Notes.
How are taxes treated in
the Air Travel Price Index?
The fares reported in
the O&D Survey include taxes and airport user fees, so the ATPI
values reflect changes in tax and fee rates as well as changes in
fares received by the airlines.
What area indexes are
published, and how often?
Each quarter, BTS
publishes the three primary ATPI series described under Question 2,
above. BTS also publishes indexes for major metropolitan areas and
for other selected groupings (e.g., types of hubs, leisure
destinations), which differ from quarter to quarter. BTS also publishes indexes for the following 85 cities:
- Albany, NY
- Albuquerque, NM
- Anchorage, AK
- Atlanta, GA
- Austin, TX
- Birmingham, AL
- Boise, ID
- Boston, MA
- Buffalo, NY
- Burbank (Los Angeles), CA
- Charleston, SC
- Charlotte, NC
- Chicago, IL
- Cincinnati, OH
- Cleveland, OH
- Colorado Springs, CO
- Columbus, OH
- Dallas/Ft. Worth, TX
- Dayton, OH
- Denver, CO
- Des Moines, IA
- Detroit, MI
- El Paso, TX
- Ft. Lauderdale, FL
- Ft. Myers, FL
- Grand Rapids, MI
- Greensboro/High Point, NC
- Hartford, CT
- Honolulu, HI
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- Houston, TX
- Indianapolis, IN
- Jacksonville, FL
- Kahului (Maui), HI
- Kansas City, MO
- Kona (Hawaii), HI
- Las Vegas, NV
- Lihue (Kauai), HI
- Little Rock, AR
- Long Beach (Los Angeles), CA
- Long Island, NY
- Los Angeles (Greater), CA
- Los Angeles, CA
- Louisville, KY
- Manchester, NH
- Memphis, TN
- Miami, FL
- Milwaukee, WI
- Minneapolis/St. Paul, MN
- Nashville, TN
- New Orleans, LA
- New York, NY
- Norfolk/Virginia Beach, VA
- Oakland, CA
- Oklahoma City, OK
- Omaha, NE
- Ontario (Los Angeles), CA
- Orlando, FL
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- Philadelphia, PA
- Phoenix, AZ
- Pittsburgh, PA
- Portland, OR
- Providence, RI
- Baltimore, MD
- Raleigh/Durham, NC
- Reno, NV
- Richmond, VA
- Rochester, NY
- Sacramento, CA
- Salt Lake City, UT
- San Antonio, TX
- San Diego, CA
- San Francisco, CA
- San Jose, CA
- San Juan, PR
- Santa Ana (Los Angeles), CA
- Savannah, GA
- Seattle, WA
- Spokane, WA
- St. Louis, MO
- Syracuse, NY
- Tampa, FL
- Tucson, AZ
- Tulsa, OK
- Washington, DC
- West Palm Beach, FL
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How do the ATPI series
differ from air travel price index series currently published by
BLS?
- Prices Included in the
Index Calculations. The Bureau of
Labor Statistics (BLS) currently publishes both a Consumer Price
Index (CPI) and a Producer Price Index (PPI) for airfares. The CPI
measures changes in the prices paid by consumers for airline
trips, including taxes and any distribution costs not received by
the carriers (e.g., travel agents’ fees), while the PPI measures
changes in revenues received by producers of airline trips. The
CPI includes trips purchased from foreign carriers, while the PPI
excludes these. The ATPI series presented here are similar to the
BLS CPI series in that prices include taxes paid as well as fares.
Distribution costs, however, are not included and, due to legal
restrictions on use of the Passenger Origin and Destination
(O&D) Survey data, the ATPI series currently incorporate only
prices reported by domestic carriers.
One of the key
differences between the ATPI and the BLS indexes is the ATPI’s inclusion of special discount fares
(e.g., internet specials, credit card
discounts, frequent flyer awards), which are not reflected in the
fares available from the SABRE system, a reservation system used
by travel agencies. ATPI fares also include bulk fares, e.g.,
tickets purchased by travel agencies for resale in packaged tours.
- Index
Formula. Another important
difference between the BLS indexes and the ATPI lies in the target
index formulas used. The BLS PPI for airfares is based on a
Modified Laspeyres formula, while the
CPI employs a "hybrid” Jevons/Modified
Laspeyres formula. The ATPI estimator,
by contrast, targets a Fisher index. For a discussion of
alternative index formulas, see, for example, Fisher (1922), Diewert (1987), or Moulton (1993). For more
information on price index concepts and design, see Schultze and Mackie (2002).
- Reference Period.
The
ATPI series also differ from the official BLS index series in
their reference period definitions. From the current O&D
Survey data, we can compute only quarterly indexes, and the
reference quarter is the quarter in which the airline ticket was
used for travel.1 The BLS PPI and CPI
are monthly, and BLS collects prices of tickets sold (not
necessarily used) during the reference month.
- Scope. The scope of the ATPI
is slightly wider than that of the BLS airfare indexes. The BLS
CPI and PPI cover only trips that originate in the
United
States, while the Full-Scope
ATPI covers trips originating in foreign countries, provided they
have a domestic portion.
Why aren’t the indexes
the same as the average fare (or "yield”) numbers computed by the
Office of the Secretary of Transportation?
Both the ATPI and the
average fare numbers are computed from the BTS Passenger O&D
Survey data, but they’re designed to measure different phenomena. In
the average fare computations, fares paid for different trip routes
on different carriers are simply combined into overall averages.
Changes in these averages do not necessarily reflect price changes;
they are driven primarily by changes in the collection of airline
trips purchased in different time periods. Thus the average fares
may, for example, show dramatic shifts even when the array of prices
facing the consumer remains relatively constant. A price index, by
contrast, is designed to isolate changes in price for services that
are essentially identical, e.g., the exact same trip route flown on
the same carrier in different time periods. A large body of theory
supports the use of the Fisher index (see above) for this purpose.
Are the ATPI estimates
included in this release "official” BTS data
products?
No. The estimates in this
release were computed for research purposes.
Are the ATPI estimates revised after they are published?
Yes. Periodically, BTS recalculates ATPI estimates for previous quarters, incorporating data that air carriers have submitted late. Most of the changes in the estimates are negligible. When substantial changes appear in the estimates for a particular quarter, the revision is noted and discussed in the ATPI release.
How are Domestic Average Fares calculated?
Average Fares are calculated using data from the quarterly Airline Origin and Destination Survey (DB1B) for domestic-only itineraries. Any itinerary that includes one or more foreign airports is dropped. An itinerary is a round-trip or a one-way trip for which no return ticket is purchased.
The Domestic Average Fare for each ticket includes the actual fare, federal taxes, airport passenger service charges, and U.S. Dept. of Homeland Security fees. The average does not include bulk fares.
To calculate Domestic Average Fares:
- Fares for complete domestic itineraries are summed by origin airport.
- Passengers are summed by origin airport.
- Revenues and passenger counts for Bulk Fare records are removed.
- The sum of all revenues is divided by the sum of all originating passengers for each airport to give an Average Itinerary Fare for that airport.
See the DB1B ticket database http://www.transtats.bts.gov/Fields.asp?Table_ID=272 for additional historic Domestic Average Fare data.
How does the Domestic Average Fare differ from the Air Travel Price Index?
The Air Travel Price Index (ATPI) and the Domestic Average Fare are different measures of the price paid by airline travelers, and can be used to complement each other.
ATPI is a precise statistical measure of fare level changes. It measures the change in fares charged by airlines from quarter to quarter.
ATPI is calculated from price changes in thousands of individual specific passenger routings and service levels where no other factor but price changed. In the case of ATPI decreasing for a city or airport, decreases in airline fares caused that change.
The Domestic Average Fare for a city or airport is derived from a calculation where the prices paid for all tickets is divided by the number of all passengers. A quarter-to-quarter decrease in the Domestic Average Fares could indicate a decrease in the actual fare level, but it could also mean fewer passengers flying the longer-haul segments, or more passengers flying shorter-haul segments, or passengers switching from higher service level (fully refundable) tickets to lower service level (restricted) tickets.
When the average fares decreases for a city or airport, airline fares may have actually decreased. Alternatively, they may not have decreased but other changes may have taken place that produce lower average fares. Fewer passengers may be flying long-distance flights. More passengers could be flying short-distance flights. More passengers may have discovered, or now qualify for, lower but unchanged fares that were always available to at least some passengers. Any of these factors could produce a lower average fares. For a comparison of average fares based on distance traveled, see the Consumer Air Fare Report.
Domestic Average Fare changes are usually the result of not just one but a number of factors. The ATPI is an index of actual airline fare changes.
A summary of factors that change ATPI and Domestic Average Fares
Fare goes up |
Increases |
Increases |
Fare goes down |
Decreases |
Decreases |
Fare remains constant, but . . . |
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. . . Some passengers change from higher to lower fare categories of tickets |
No change |
Decreases |
. . . More long haul flights are offered and more passengers use them |
No change |
Increases |
. . . More short haul flights are offered and more passengers use them |
No change |
Decreases |
. . . Short haul flights are reduced and fewer fly short haul segments |
No change |
Increases |
1 If an itinerary
straddles multiple quarters, it is counted in the quarter in which
the first ticket in the itinerary is used.
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