Source: The Atlantic

Look at the graph here. The average price started off at $600 in 1980, now getting dropped to $360 of 2013 (the latest data in 2019 prepandemic is $359). The Atlantic attributed the drop thanks to deregulation by the US government. Believe it or not, it used to set price of how much airlines should charge.

But I don't believe so. This drop is global phenomenon. If you look at the price trajectory of the Japanese, it follows a similar decline. Between 1950-2015, it achieved triple cost reduction as well.

There has been an innovation in scale of economy in manufacturing more planes and packing more seatings. And an improved efficiency in logistic was a contribution as well. The negative pressure is the rise in gas price.

But if you look at those graphs. the price has had a huge fluctuations. In US case, the price 2019 price has caught up to the level that of 2002. The Japan case floated from 1980 to 2005 at the same price. Is the huge swing caused by change in gas price? Let's have a close look.

Gas price since 2002 made a huge jump which is settled around 2 to 3 times more expensive today.

Gas price contributes to about 23% of the total cost (another data shows around 25-27% in 1999. We'll keep assume the fuel cost is the same at today and previous period). The gas price has doubled if not tripled since 2002.

Let's say the price of flight was $400 in 2002, the gas price was $92. That cost has increased by 2019 at $184-276. That means if the gas price stayed constant from 2002, the ticket price would have dropped from the today's $83-267. $267 seems certainly plausible following the trend of $100 decline every decade.

US Energy Information Administration

Will the price keep going down?

To make a general analogy, we are fighting tight with the oil price.

To put it another way, if the gas price double every decade that will completely offset all airline effort and technological innovation.

Assuming oil price stays constant, we will reach $100 flight price tag in 2045, following the historical innovation progress.

Thankfully that seems unlikely thanks to shale gas revolution. Solar energy revolution is coming up too which should free up oil usage in household automobiles.

If we can get alternative energy source directly to the plane we can even skip that 25% fuel cost just like electric cars, although that is unlikely for the foreseeing future. Tesla owner is only paying 1/10th of the fuel cost after all.

Having said those possibilities to drop price, there's a limit to how low it can go considering the labor cost and of course the basic physics of material cost. We can imagine the flight ticket will never be $1 even in 50 years. At some point, consumers start looking for improved quality (ex: more space in seatings like business class).

When will we reach that point? We can only speculate. I'm considering that cross over happens when the average flight tickets reach $100. It's only subjective judgement as a consumer. That's how much we pay for in nice dinner out with your family. For casual vacation, we don't mind paying for that range.