How Airlines Stay Highly Profitable Despite Falling Ticket Prices | Airline Travel News

For those of you who happened to buy a plane ticket in the past month, you may have noticed a welcome change in price. Airfare was down a good amount in June compared to the same month in 2022 (-18.9%) and compared to May (-8.1%), according to this week’s consumer price index (CPI) data.

Declining jet fuel costs were the largest contributor to lower fares.

Although this benefits consumers, especially during the busy summer travel months, investors may be wondering: Will airlines generate less revenue as a result? Not so fast.

In a letter out this week, Goldman Sachs reports that there doesn’t appear to be a meaningful relationship between airfare CPI and U.S. airlines’ revenue per available seat mile (RASM). Investors, therefore, need not worry—at least not about falling ticket prices.

Check out the chart below. It compares annual percent changes in airfare and airline revenue per seat. Goldman found that there isn’t a strong link between the two, meaning that just because ticket prices are dropping, it doesn’t necessarily mean that carriers are making less money. The bank estimates that second-quarter RASM was off 3% compared to last year’s quarter, but that’s a far cry from how much fares fell during the same period.

Discrepancies Between CPI and RASM in the Airline Industry

So why the discrepancy? The Goldman report doesn’t provide many insights, but I think I can offer a couple.

For one, the Bureau of Labor Statistics (BLS), which issues the monthly CPI, and the airlines are measuring two separate things. The CPI allegedly measures the average change in prices paid by urban consumers for air travel over time (though I’ve raised questions about the methodology many times in the past, most recently here). On the…

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Several ways to buy cheap airline tickets.
- Start searching at least 2 months in advance and sign up for email alerts so you'll always be notified when flight prices drop.
- Budget airlines typically offer the cheapest flights.
- Save money by taking your flight early in the morning or late at night.
- Consider flying on a weekday instead of a weekend.
- Use an aggregator site to compare prices across airlines.
- Once you have found the best trip, select it on the aggregator site and move to the airline’s direct website to book your tickets. Some aggregators allow you to book the ticket through their website, but there may be an additional service fee.