Analysis
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Air fare indexes
In 2006, the all-fare index (2002=100) for domestic and international (including Canada-United States) scheduled services operated by Canadian Level I air carriers (Air Canada, Jazz, Air Canada's Canadian regional code-share partners, Air Transat and WestJet) rose 3.7% from 2005 to reach 94.3, continuing the upward trend that began in 2005, but at a faster pace. Between 1996 and 2006, the total all-fare index increased 41.6%.
In 2006, the air fare index for all fares for domestic scheduled services was 93.7, up 2.9% from the 2005 level of 91.1. This acceleration was attributable to higher business class fare (+5.3%) and discount fare (+3.3%) indexes. As shown in Chart 1, the domestic air fare index increased steadily from 1996 to 2002 (+59.0%) when it started to trend down until 2004.
The all-fare index for international scheduled services posted an increase of 4.5% from 2005 to reach 94.4. This gain followed the 3.1% decrease registered between 2004 and 2005. Between 1996 and 2006, the international all-fare index advanced at a slower pace (+33.9%) than the domestic all-fare index (+49.0%).
Average air fares
In 2006, the average air fare (all types, all sectors, on a coupon origin-destination basis) paid by passengers was $252.00, up 0.3% from $251.20 in 2005, continuing the upward trend that began in 2004, but at a slower pace. The continuation of the recovery in fares for the third consecutive year slowly neutralized the strong annual decline reported between 2002 and 2003 (-11.8%). The expansion of services by low fare airlines with low-cost structures, the slowdown in demand due to the war in Iraq and the negative impact of SARS partly explained the decrease in air fares in 2003.
The average domestic air fare (all types) paid by passengers was $192.00 in 2006, up 0.3% from $191.40 in 2005, a slowdown from the 5.9% rate of growth posted in 2005. These increases followed the 2.4% decrease between 2003 and 2004 and the strong annual decline reported between 2002 and 2003 (-12.9%). As can be seen in Chart 2 below, this second consecutive annual decrease tended to bring the average domestic air fare back to the lowest level reported in the past 10 years, $177.00 posted in 1996.
The average international air fare (all types) was $350.20 in 2006, up 1.4% from $345.50 in 2005, but still 3.3% lower than in 2004. The decline of air fares in the international sector between 2004 and 2005 and the relatively small growth between 2005 and 2006 can be partly explained by the increased fare competition between the major "legacy" scheduled carriers and the low-cost carriers or charter carriers.
Average domestic air fares at the city level
In 2006, average domestic air fares advanced in three of four selected eastern Canadian cities of enplanement compared to 2005, while they edged up in two of six selected western cities of enplanement 1 . From 2005 to 2006, the increases ranged from 0.7% in Toronto to 3.2% in Ottawa. During this period, the fares decreased in Calgary (-0.5%), Halifax (-0.2%) and Vancouver (-0.6%). In 2006, Montreal, Ottawa, Toronto and Vancouver had average domestic air fares above the national average ($192.00).
Between 2000 and 2006, average domestic air fares posted a double-digit decline in all selected cities, except Vancouver, which incurred a loss of 5.1%. In 2000, the average domestic air fare paid by passengers had reached an all-time high ($223.50). That year, the four eastern cities had average air fares above the national average, while the six western cities had average air fares below the national average.
Notes:
The estimates are derived from a sample of flight coupons collected as part of the Fare Basis Survey. The estimates relate to the operations of major Canadian air carriers. For 2006, the air carriers included are the Canadian Level I carriers (Air Canada, Jazz, Air Canada's Canadian regional code-share partners, Air Transat and WestJet). Imputation has been performed for incomplete and missing data.
For purposes of statistical tabulations, fare codes reported by the air carriers are grouped by general fare type. These fare types are defined as follows:
- First class. The transportation of a passenger or passengers for whom premium-quality services (e.g. larger seats, complimentary bar) are provided.
- Business class. A fare level which is less expensive than first class and more expensive than the basic fare level. It includes different amenities (e.g. larger seats, advanced seat assignment).
- Economy. A basic fare level which is less expensive than first class but does not include the amenities (e.g. larger seats, complimentary bar) of the first class fare.
- Discount. A reduced fare usually subject to one or more travel restrictions, the price of which is usually calculated as a percentage reduction from the normal full fare. It includes various discount fares such as charter class, seat sales, advance purchase excursion, group.
- Other. Represents industry and agency discount fares, military as well as unknown fare codes.
The air fare index is a measure of the rate of price change, providing indications of the overall trend of domestic and international fares over time, while average fares measure the actual level of fares paid by passengers. The different series of air fare indexes produced by the Aviation Statistics Centre were calculated on an annual basis using the chain Laspeyres index method linked at the annual level, with annual updated weights (the time base is 2002=100).
The average fare is obtained by dividing the carriers' revenue by the passenger volume, as measured by coupon origin and destination.
The average domestic air fares at city level are the average for all coupons originating in that city, for all domestic destinations. The level of average fares can be affected by changes in travel patterns, as well as prices.
Additional information on Fare Basis statistics can be obtained directly from the Aviation Statistics Centre. Tables are available in print form or in electronic format. For further information, please contact the Aviation Statistics Centre (telephone: 1-866-500-8400; Internet: aviationstatistics@statcan.gc.ca).
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