Wednesday, June 4, 2008

Are Air Fares Getting Cheaper?

UAL (United Airlines) announced they are retiring 70 jets because the routes they fly are no longer profitable despite increases in fares. Inflation is a drop in the value of currency. The goods usually cost the same in trade or when using other currencies, though during high inflation not all goods adjust in price at the same rate. Obviously fuel prices have been a leader in the inflation run up. True or not airlines are saying that air fares are not keeping up with inflation. Inflation is mainly caused by extra money printed by the government in substitution of new taxes. With the Iraq, hurricane relief, new social welfare spending, and Home Land Security the government has had plenty of reason to flood the market with dollars. The air lines have been hit with higher fuel prices and new taxes and are not known for good management decisions. The result is a shake up. But are air fares really cheaper when compared to the price of other goods? I checked the price of a flight I have taken several times in the past. The rate has tripled. In the last three years few things I buy have tripled in price. Obviously one route is not a very good analysis of prices. I do believe the airlines claim that fares are a bargain compared to what they will be in the future.

1 comment:

Anonymous said...

It is pretty discouraging. The route we take every year is up about 30% from last year. We keep watching, but I really doubt it will drop. The tax/rub is that wages increase, but at a lag to prices. So... the middle and lower class get holding the bag for the warped redistribution that is supposed to "help" them. Truisms remain true: Nothing is free.