Upvote:1
Another factor is the price of oil. Fuel prices are a large cost driver for airlines and in a competitive market price changes are likely to be passed on to customers.
If you go to http://www.macrotrends.net/1369/crude-oil-price-history-chart turn off inflation adjusted, turn off log scale and set the time to 20 years you can see a picture of what has happened to oil prices in actual dollars.
If we look at the graph there was a general upward trend until 2015 or so with a peak and crash in 2008. Then there was a sharp drop back in 2015 brining the price back to 2005 or so levels.
Upvote:4
While not disagreeing with alamar, I think there's another way of looking at it.
The travelling public is incredibly price sensistive.
In other words, people really want to fly places, but pretty much everyone will pick the cheapest option whenever they do, outweighing considerations of comfort, convenience, time etc.
This means that an airline that offers a flight for $390 will sell lots more tickets than one offering it for $400. Airline profit is all about filling seats (since the marginal cost of flying a full plane over one with an empty seat is pretty much nothing). This means the $400 airline will quickly cut its price, which means the $390 airline will cuts its price, and so on.
Price sensitivity also explains the low cost airlines exist, which manage to sell tickets no matter how inconvenient or uncomfortable their flights. It also explains why there is a constant reduction in comfort (packing in more seats to a plane) and a switch to additional fees - people choose the $380 flight over the $400 flight, without realizing that the $380 flight involves a $20 baggage fee and a $10 'airport fee'.
It's also worth pointing out that while prices are remaining constant, you are getting less for your money in some terms. Once upon a time your flight included a decent amount of leg room, a meal, a free checked bag, the ability to choose seats, and the guarantee that if you bought a ticket you would actually get on the flight. Now the price of your ticket does not include those things.
Upvote:7
There's deregulation and increase of competition.