Airfares versus government fees since the 1970s

by philg

I was reading my favorite intellectual journal the other day, i.e., Delta Sky magazine (free in every seatback pocket), and chanced upon an editorial by Richard Anderson, the CEO of Delta. Anderson notes that “average price of your ticket (adjusted for inflation) today costs about half of what it did prior to deregulation.” Considering that the airlines are plagued by unions and high oil prices, this is either an impressive tribute to the brilliance of managers such as Anderson or evidence of spectacular inefficiency during the regulated years.

With the massive increase in passengers going through airports and the increase in the average size of an airplane, you’d think that the cost of getting a passenger through an airport would have gone down. Anderson says it isn’t so: “Since the 1970s, the taxes and fees airline customers must pay has nearly tripled, and Congress again is proposing an increase in passenger facility charges from the current $4.50 to $7 per flight segment. This increase means airline customers would pay an additional $2 billion in taxes per year–an average of $112 per trip for a family of four.”

7 thoughts on “Airfares versus government fees since the 1970s”

  1. I think it is probably a combination of both, or more precisely the regulations kept them from using good management to increase efficiency. I think once the airlines were no longer forced to cover certain routes, they could transition to this hub and spoke networks, which lead to many efficiencies.

  2. Um… where to begin? The comparison is massively inappropriate.

    What you get for your “airfare” today is so much less than what you got in the 1970s. Back then, your ticket bought you a seat on basically any flight you could find a reservation for, with no fees for changing your travel dates or even cancellation. Outside of peak periods, you most likely had an empty seat next to you. You could check at least two large bags and carry on two more. You got a hot meal on any flight longer than an hour. You got the company of sweet young stewardesses in short skirts. Your flight was scheduled more precisely, and was more likely to be nonstop to your destination and on a new wide-body jet. You probably didn’t arrive at the airport more than a half-hour before your flight, saving you much valuable time. If you were going to or from Denver, your airport was conveniently located in the city.

    How much would a comparable experience cost today? An awful lot more than it did in 1978, if you could get it at any price.

    And as for the taxes and fees, the airport system was even more heavily subsidized then, so whatever small fees one might have paid were a tiny fraction of what it actually cost to build the airport. If you were of the “flying class” your income taxes were much higher then, so you were undoubtedly paying more for your airport experience one way or another.

  4. The amount the government spends on each passenger has gone up as well. What better way to make people aware of the impact of heavier security screening and FAA oversight than to increase the cost of air travel equivalently?

  5. Here is a book by Crane and Boaz “An American vision: policies for the 90s”, where they discuss deregulation. The point out on p 77 that deregulation freed up the airlines to innovate. The hub and spoke innovation leads to a great reduction in the number of aircraft and crew needed to connect cities. With direct flights connecting 10 cities requires 45 crew, whereas hub and spoke only 9.

    http://books.google.com/books?id=TjRhWUP5hK4C&pg=PA77

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