Why are airfares getting cheaper or at least we have stable airfares for the last 10 years?

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.

  • Carriers now provide simplified service: worse meals, fewer meals, fewer baggage options, paid baggage options, etc, etc. This includes well-established airlines. They are no longer obliged to provide that stuff for free, and they actually can't at the price point where they're at.
  • There's also competition: Airlines from Dubai/Abu Dhabi/Quatar work in zero-tax environment, can provide much cheaper flights. Traditional airlines have to cut expenses and/or apply for tax exemption or outright subsidies to their national governments.
  • Money is cheaper now. Deposit rates approach 0%, and loan rates hover slightly above. Even when carriers are based in countries with more inclined currencies, they find ways to borrow at low rates. This means planes leasing is cheaper for them.
  • Airports also figure out other ways of raising money other than putting it in your ticket, such as duty-free shops or shaving some money from rail/bus tickets to the airport.
  • There are economies of scale. When there are twice as many people and twice as many planes, it's slightly cheaper per person and per plane.
  • Internet does matter. 15 years ago airlines dabbled in ripping off customers who bought tickets on their website, showing triple prices to you if they thought you were rich or a business traveller. Today, you would fire e.g. skyscanner and see competitive offerings.

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