How Airline Ticket Prices Have Hit An All-Time Low

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An airline ticket in 1960 would cost around $2,600 today

We’re in a rare era for travel with airline tickets at the lowest prices in history. We breakdown the evolution of air travel and how innovation helped lower prices over the years.

Nearly 60 years ago air travel was considered a luxury as it was too expensive for the masses, in 1960 a Pan Am flight from New York to London would have cost $300 or $2,600 with modern inflation. Now you can catch the same flight for just a tenth of that price thanks to innovations in the aviation field.

The first scheduled commercial flight commenced in 1914 in Florida from St. Petersburg to Tampa, holding only one passenger and was piloted by Tony Jannus. Back then traveling this distance would have meant 12 hours by train but by air cut the long journey down to 28 minutes. This flight proved further demand for travel by air and Jannus made history laying down the groundwork for the modern aviation business.

In 2018, there were an estimated 45 million flights worldwide with the average price of a domestic flight in the U.S. of $350, this might still seem expensive but looking at the average cost of flights over time you can see this is less than back in 1980. With current inflation adjustments, in 1980 a plane ticket for a domestic U.S. flight cost over $650 and decreases over the decades for the current average price of $350.

The time from 1950 to 1980 was a crucial time for the development of the aviation industry. Before 1978, routes and fares in the US were closely regulated by the federal government and resulted in many routes offering fixed prices. Being in a highly regulated industry, the federal government would be in charge of setting the various routes and rates with airlines raking in all the profits. This wasn’t the case for most aviation industries as different countries worked under different regulation guidelines.

In Europe the routes and rates were state-controlled, treating air travel as a public service like other means of transportation like public busses and trains, with everything changing in 1978. The 39th U.S. President, Jimmy Carter, signed the Airline Deregulation Act in 1978 and opened the aviation industry for business.

With freedom from government regulation, the airlines could start focusing on their main goal of selling airline tickets. After deregulation, there was a massive fight with airlines doing everything to make market share but not really focusing on profitability with the theory that the more people they could get onto a plane would lead to successfully dominate the market. The only problem was they weren’t looking at it as a business in order to make the profit they were seeking.

The business aspect is crucial in times of economic distress such as a spike in oil prices or a recession, the times where airlines start to fail. Another aspect in the commercial airline evolution is the advancing technology that made airplanes more efficient.

New wing technology such as winglets made airplanes more aerodynamic and reduced flight times. Computer systems started to take over older technology previously used in the cockpit and made planes less reliant on pilots. Another innovation in the airline industry was the development of travel websites, making prices even more competitive.

The development of websites like Priceline and Expedia launched in the late 1990s, cataloging all of the lowest prices for flights, giving budget airlines the opportunity to thrive offering competitive prices better than more luxury airlines. This competition model was unsustainable for airlines leading to companies folding, merging, or absorbing into another company completely.

This lead to four of the top U.S. airlines to control 80% of the market including American Airlines, United, Southwest, and Delta. Southwest offers a fleet of 753 airplanes with each plane averaging 6 flights per day, offering around 4,000 flights per day under one airline. This may sound like a lot but the frequency is decreasing across the U.S. due to the increasing “load factor.”

The load factor refers to a key metric used by the airlines in regards to occupancy rates including how many seats are available and what percentage of said seats are being sold or occupied by passengers. This means an aircraft is collecting the most profit when flying at full capacity.

Maintaining the load factor allows airlines to continue to offer low fares because most of the seats are being sold, this isn’t the best situation for passengers with more people meaning less provided service and space to accommodate for the bigger amount of passengers. Budget airlines including Ryanair, Norweigan, Frontier, and Spirit can offer lower fares by charging extra for usually included amenities like reserving your seat or checking luggage while also cutting costs wherever they can.

The Ireland based airline that flies all across Europe, Ryanair, puts around 200 passengers on a Boeing 737 plane while other airlines will only carry 150-160 passengers. This might lead to crowded planes but it definitely maximizes profit.

If you book a flight on Norweigan airlines from New York to London the initial ticket will cost a lower price at $320 but you’ll have to pay for extra services that can easily double or triple your initial ticket price. For the standard ticket, you’re only allowed to bring a small piece of hand luggage but if you want to bring more than that you’re price increased to $490 and if you want to check two bags with the option for a refundable ticket the price increases to $1,379.

Comparing these prices to a flight you would get in 1977 (with inflation-adjusted prices), it’s $100 more now and came with all the extra amenities included as standard with more legroom too. More airlines are adjusting to the budget model adding hidden fees along with the ticket price including additional charges for choosing your seat or checking your baggage.

Though prices might be better than ever, we warn that your initial price advertised might not be the deal you think it is and the experience now is less pleasant than back in the 70s. The steady decrease in price might not continue for long as aviation emissions are predicted to possibly triple by 2050 with many countries starting to implement stricter environmental taxes for flights.

This may sound alarming but with the innovations in aircraft technology, there is hope that aircrafts will be burning less fuel in the future.

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