Airfares Drop at Record Rates Thanks to Fuel Prices

Airfare prices fell sharply in July, following an overall drop in fuel prices.

Airline ticket prices fell nearly 6 percent in July, the largest drop in consumer airfare in 20 years, the U.S. Department of Labor said in a report released Wednesday, following a drop in fuel prices.

The airfare index dropped sharply in July, falling 5.6 percent, its largest decline since December 1995. The labor department’s Bureau of Labor Statistics released the information as part of its monthly Consumer Price Index (CPI) summary.

The July gasoline index increased for a third consecutive month, rising 0.9 percent; before seasonal adjustment, gasoline prices declined 0.2 percent in July.

The index for natural gas dropped 1.4 percent after rising in June. The fuel oil index fell 3.4 percent following a 1.9 percent drop in June.

Meanwhile, for the last 12 months, the fuel oil index posted a decline of 29.7 percent, and the gasoline index decreased 22.3 percent. The index for natural gas dropped 14.2 percent for the fiscal period.

“When fuel prices fall, passengers always ask why that savings isn’t passed along to them; but airlines don’t start planning to add capacity until six, nine, 12 months out,” Seth Kaplan, managing partner of Airline Weekly, said in an interview with CNBC Wednesday. “The one thing I’m surprised about is how quickly it happened, and as you look at future capacity it’s growing even faster, so prices will likely fall even further.”

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.2 percent before seasonal adjustment.

See the full release here.

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