Even with fees, airfares are a relative bargain

airfares7.jpgAnother myth shattered - the average fare of $365.23 in 2011 (including fees) compares with the average of $611.76 in 1980 (adjusted for inflation). That's life in the age of deregulation. If you break it down by cost per mile, the difference is even greater - pretty amazing given the huge increases in oil prices for the same period. What's considered a bargain for passengers, however, has been hell for the airlines. The profit margin for U.S. carriers was 0.8 percent in 2011 and the industry lost money in seven of the last 11 years. Even so, economist Mark Perry believes that the industry is starting to figure things out.

The airline industry is extremely competitive and airlines as a group have only been able to earn positive profits in half of the years since 1981. For the last two years airlines have been able to earn a small profit on very thin profit margins, and the higher -percentage load factor] and higher baggage fees have probably helped. The airline industry today is probably closer to a sustainable competitive model than in the past, when we got spoiled with free food and flying on planes with plenty of empty seats. Overall, consumers have reaped significant benefits from the deregulation of airlines in 1979, and have saved billions of dollars in lower fares. Like any industry, the airline industry is evolving over time, and consumers have to adjust to the changes.

Airlines for America has put together a fascinating chart that lays out all kinds of financial data for the carriers going back to 1948. That year, the percentage load factor, which measures how full the planes are, was only 57.5 percent. By 2007 it was close to 80 percent - and in 2011 it was well over 85 percent. So you're paying less, but at a big cost in comfort.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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