Standard Industry Fare Level

Overview

About SIFL

The Airline Deregulation Act of 1978 (ADA), Public Law 95-504, substantially amended the Federal Aviation Act of 1958, setting both deadlines and policies for the economic deregulation of interstate and overseas (domestic) air transportation. Among other things, the ADA significantly limited the Civil Aeronautics Board's (CAB) discretion to prescribe domestic fare levels. The CAB had to establish a "Standard Industry Fare Level" (SIFL), based upon fares in effect on July 1, 1979. The CAB was to periodically update the SIFL by the percentage change in airline operating cost per available seat-mile. Once established, the SIFL was the standard against which a statutory zone of reasonableness was to be measured.

While the SIFL theoretically was to apply to all fare classes offered on July 1, 1977, in practice the SIFL has been applied to only the unrestricted coach fare. Except for matching certain lower intra-state carrier fares in California, Florida, and Texas, and separate (lower) intra-Alaska/ Hawaii, and mainland-Puerto Rico/Alaska/Hawaii fare setting entities, in 1977 all carriers were required by the CAB to have an unrestricted coach fare based upon the CAB's prescribed Domestic Passenger Fare Investigation (DPFI) distance-based formula rate in markets that they served. After the passage of the ADA, the Board, using its discretionary authority, increased the maximum that could be charged in the intra-state markets to the DPFI level, and significantly increased the flexibility above the SIFL ceiling granted by the ADA for all markets. The CAB's authority over passenger fares terminated January 1, 1983.

Key Documents

• Methodology for Determining Change in Operating Expense (Attach. A)
• Fare Formulas 1979 - Present (Attach. B)
• Fuel and Nonfuel Costs and Annual Yields (Attach. C)

How SIFL is Determined

In determining the change in airline operating cost per available seat-mile, total operating costs are separated into fuel and non-fuel components. Non-fuel costs are divided by the available seat-miles for the latest twelve-month period, and compared to similar costs for the preceding twelve months. This annual rate of change is projected to the midpoint of the forecast rate period, now six months, to produce a non-fuel cost per seat-mile at the midpoint of the forecast rate period. Fuel costs, because of their volatility and more frequent reporting, are constructed similarly, but estimated at the midpoint of the forecast rate period based upon the most recent fuel cost data available. The most recent six-month SIFL computation is Attachment A.

The Department of Transportation has continued to calculate the SIFL adjustment factor to aid in its evaluation of carrier pricing in the free market. The SIFL is also used by the Internal Revenue Service in imputing the value of free transportation provided on corporate aircraft.

The SIFL formula from May 15, 1979 foreword is shown above in Attachment B. The separate fuel and non-fuel components of the SIFL are shown and indexed in Attachment C, along with the index of revenue per revenue passenger mile.