Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating Airline Ticket Prices
Transcript
- Lucas: So here's a weird one — you know how we've been tracking wages finally catching up to specific prices, episode after episode. Well, I was looking at the May CPI data that came out last month, and one category jumped out: airline tickets. For the first time in about three years, the average hourly worker's raise is actually beating the cost of flying. Luna: That feels almost counterintuitive, because everyone I know says flying is more expensive than ever. Is that just anecdotal bias, or is something real happening? Lucas: Both, honestly. Let me give you the numbers. Average hourly earnings for private workers hit $37.50 in May, up from $37.41 in April — that's about a 2.4 percent annualized increase. Meanwhile, airline fares in the CPI actually fell month over month in May, and they're down about 5 percent year over year. So in real terms, your wage is buying more air travel than it did a year ago. Luna: Right, but the CPI for airline fares is notoriously volatile. What's driving the drop this time? Lucas: A few things. First, capacity. Airlines added a ton of seats in 2024 and 2025, especially on domestic routes. The big three — American, Delta, United — plus the low-cost carriers like Southwest and Spirit, they all ordered planes during the recovery, and those deliveries are finally showing up. More seats mean more competition, which pushes fares down. Luna: And fuel costs have been relatively stable too, right? I mean, oil prices haven't spiked like they did in 2022. Lucas: Exactly. Jet fuel is a huge input cost, and with the ten-year breakeven inflation rate at 2.2 percent, markets are pricing in pretty calm energy costs. So airlines aren't under pressure to pass on fuel spikes. Plus, the post-pandemic revenge travel boom has faded — demand normalized, so airlines can't charge peak premiums on every seat. Luna: So if I'm a typical worker making median weekly earnings of $1,204, my raise is actually giving me more real miles this year than last. But that doesn't match what I see when I search for flights. Lucas: That's because the headline fare number hides a lot. The CPI measures the price of a ticket, but it doesn't capture all the ancillary fees — baggage, seat selection, priority boarding. Those have been creeping up. So your base fare might be lower, but the total cost of flying isn't dropping as much. Luna: So the wage gain is being partially eaten by fee inflation. How much of a gap are we talking? Lucas: It's hard to get an exact number because airlines don't break out fee revenue per passenger uniformly. But industry data suggests that ancillary revenue per passenger has grown about 8 percent over the past two years. So if your wage is up 2.4 percent, but fees are up 4 percent annually, you're still losing ground on the total travel experience. Luna: But the base fare is where most people focus, and that's the part that's actually getting cheaper in real terms. So for a leisure traveler who packs light and doesn't check bags, this is a genuine win. Lucas: Exactly. And that's the key insight — your raise is finally beating the sticker price of flying, but not necessarily the all-in cost. The savvy traveler can capture that wage gain by avoiding add-ons. But the airlines are smart; they're shifting revenue from the ticket to the extras. Luna: What about international flights? The CPI data is mostly domestic, but I imagine international fares are a different story. Lucas: Totally different. International capacity hasn't recovered as fast — especially transatlantic and transpacific routes. There are still slot constraints at major hubs, and some countries have higher airport taxes. So international fares are still up year over year, maybe 2 to 3 percent. Your raise is barely keeping pace there. Luna: And premium cabins? Business class and first class — those are a whole different price universe. Lucas: Right. Premium fares are driven by corporate travel demand, which is still below pre-pandemic levels because of Zoom and hybrid work. So actually, business class prices have been softer than economy on some routes. But that's a niche. Most listeners are probably in economy, and domestic economy is where the real wage win is. Luna: So the bottom line: if you're a typical wage earner and you book a domestic flight for the summer, you're getting a better deal in real terms than you did last year. That's a nice change from the last few years. Lucas: It is. And it's a good example of how inflation is uneven. The core CPI is still running at 3.4 percent — that's the highest since October 2023, according to last week's PCE report. But within that, some categories are actually deflating. Airline tickets are one. Used cars are another. So your raise isn't beating everything, but it's beating the stuff you might actually want to spend on. Luna: And that's the kind of granular detail that makes this show useful. You can't just look at the headline inflation number and assume it applies to your life. Lucas: Exactly. And you know, if walking through the economy with us has made something click — whether it's understanding your own paycheck or just seeing the data behind the headlines — we'd love it if you considered supporting the show. We keep it ad-free, and listener support is what makes that possible. You can find us at buy me a coffee dot com slash fexingo. Luna: Yeah, it really does help us keep doing this deep dive every week. Even a small contribution goes a long way. Lucas: So back to airline tickets. One thing I want to watch is whether this trend holds into the fall. Airlines are already reporting weaker forward bookings for September, which could push fares down further. But if fuel prices spike because of something like the Strait of Hormuz situation — which has been in the headlines — then all bets are off. Luna: That's a good point. The geopolitical risk is real, and it's one of those things that can reverse a trend overnight. Lucas: Right. But for now, June 27, 2026, if you're a worker with a steady job and a raise in your pocket, you can book that domestic flight with a little more confidence that your money is going further than it did a year ago. That's a small win, but we'll take it. Luna: And maybe skip the extra legroom seat. Lucas: Ha, exactly. Next episode, we'll look at another category where wages are finally catching up. Until then, keep an eye on those ancillary fees.