Pay Up to $150 More to Fly Depending on Where You Live

Published on March 11, 2014 by

Summary

  • Higher air travel prices correlate with lower income and typical round-trip airfare declines by $2.30 for every additional $1000 in median household income.
  • Mississippi, the state with the lowest median income, pays about $400 for a “good deal” per round-trip flight, compared to Maryland, with the highest income, where “good deal” flights are $300.
  • Although income is correlated with prices, we found three key underlying factors that drive cost: average distance traveled, demand density, and airline competition.
  • States with lower income also tend to have lower competition and lower demand density.
  • Wyoming, Louisiana, Nevada and South Carolina face the highest premiums due to lack of competition ($167, $138, $130, and $119).
  • Alaska, Hawaii, and Wyoming are the three most expensive states in the US to fly from, with “good deal” round-trip tickets priced at $567, $526, and $429 respectively.
  • Residents of Delaware, Rhode Island, and Massachusetts getting the best deals, with prices coming in at $261, $274, and $275 respectively.

 

The Most and Least Expensive States

Hopper took a look at how much it costs to fly depending on where in the US you live (Figure 1).  It turns out that Alaska, Hawaii, and Wyoming are the three most expensive states to fly from, with round-trip tickets priced at $567, $526, and $429 respectively.  By comparison the three cheapest states are Delaware, Rhode Island, and Massachusetts, with ticket prices coming in at $261, $274, and $275 respectively.  A full list of States and cost, as well as different factors that contribute to that cost can be found at the end of the article.

Figure 1: Average 10 percentile price to fly in and out of each US state

 

Ticket Prices and Median Household Income

The cost to fly from each state is correlated with how much households earn in each state.  A simple regression model show that typical round-trip airfare declines by $2.30 for every additional $1000 in median household income (Figure 2).

Figure 2: Correlation between round trip fare and the median household income by state

 

Ticket Price Drivers

Hopper dug deeper to understand the underlying factors that drive the prices in each state.  We found that there are three key factors impacting the price to fly in and out of each state:

  1. Density
  2. Distance
  3. Competition

We found that the biggest individual factor is the “density of demand” in the origin state (and to a lesser extent the destination), explaining over half (about 52%) of the variation in average ticket prices.  Large states with smaller populations are more expensive to serve, since lower demand makes it harder to fill airplanes and a dispersed population makes it harder to fill airports.  The connection to income is that states with higher median incomes tend to have higher “per capita” rates of flight search, so have a higher effective “density of demand”, all other things being equal.

Distance flown in and out of each state explains about 16% of the variation in ticket prices, with each additional mile flown adding about 6 cents to the cost of round-trip tickets.  This is easily understood since fuel cost is one of the largest expenses for an airline, and the further you fly the more fuel you burn.

Finally the level of competition accounts for about 7% of variation in ticket pricing.  States with lower median household incomes also tend to be less well served by the airlines, with less competition meaning fewer airline choices and a higher average number of stops between origin and destination, being further from “hubs”.

Together these three factors (density, distance, and competition) explain about 75% of the total variation in average ticket prices and account for all of the observed variation by median income.  The underlying explanation for the correlation between prices and income is based on three key factors: average number of stops between origin and destination, number of airlines per route, and per capita rates of flight search (see Figure 3).

Figure 3: Correlation between median income and number of stops, airlines per route, and search demand per capita

 

Figure 4 and Table 1 below show how the price to fly in and out of each state is impacted by each of the three factors.

Figure 4: Price to fly in and out of each state broken out by components

 

name 10 percentile price Cost due to competition Cost due to distance Cost due to density Other
Alaska $567.02 $118.84 $157.85 $212.80 $77.54
Hawaii $526.60 $109.81 $152.91 $43.95 $219.93
Wyoming $481.50 $167.66 $72.75 $87.29 $153.79
Montana $429.21 $119.58 $83.48 $98.54 $127.62
South Dakota $418.48 $92.92 $73.64 $112.28 $139.64
North Dakota $417.42 $94.36 $78.78 $107.42 $136.86
Idaho $411.35 $117.13 $85.61 $92.52 $116.09
Mississippi $400.57 $104.85 $71.39 $76.82 $147.51
West Virginia $381.87 $96.86 $66.07 $77.61 $141.33
Alabama $380.11 $106.98 $71.47 $54.99 $146.67
Oklahoma $378.78 $84.56 $70.69 $82.46 $141.06
New Mexico $373.11 $98.14 $82.19 $93.96 $98.82
Kansas $372.97 $98.20 $67.91 $95.06 $111.79
Utah $368.52 $92.42 $87.64 $54.79 $133.67
Arkansas $366.73 $101.54 $71.15 $72.54 $121.50
Kentucky $366.52 $102.13 $67.51 $55.06 $141.82
California $364.39 $68.77 $111.97 $41.36 $142.29
Nevada $353.81 $131.42 $104.68 $40.72 $77.00
Iowa $346.81 $93.12 $74.70 $61.52 $117.47
Indiana $346.52 $83.04 $78.19 $48.40 $136.90
Wisconsin $345.55 $74.34 $78.64 $59.19 $133.38
Nebraska $345.03 $88.93 $72.73 $67.30 $116.06
Ohio $340.29 $82.38 $74.04 $45.73 $138.15
Missouri $333.85 $74.46 $75.71 $56.38 $127.30
Tennessee $332.53 $102.81 $71.29 $50.01 $108.41
Arizona $330.41 $104.64 $96.41 $54.29 $75.07
Virginia $327.57 $87.71 $79.23 $56.45 $104.18
Louisiana $327.38 $139.19 $74.38 $32.83 $80.99
Oregon $327.15 $77.69 $102.11 $66.40 $80.95
Michigan $320.56 $59.55 $79.00 $50.69 $131.33
Washington $320.45 $80.57 $103.64 $70.25 $65.99
South Carolina $320.01 $115.03 $67.46 $35.37 $102.15
Pennsylvania $319.71 $62.26 $88.22 $51.65 $117.58
District of Columbia $318.49 $67.26 $89.62 $46.41 $115.20
Texas $317.70 $85.80 $77.55 $44.69 $109.66
Maine $316.09 $90.02 $88.98 $58.17 $78.93
Vermont $313.48 $89.24 $84.81 $44.92 $94.50
North Carolina $310.13 $87.19 $75.65 $41.52 $105.78
Georgia $308.58 $45.16 $77.09 $38.04 $148.29
Minnesota $307.60 $29.94 $80.22 $66.09 $131.35
New Jersey $306.88 $67.04 $97.84 $37.77 $104.24
Illinois $304.35 $71.55 $80.58 $40.85 $111.37
Connecticut $301.59 $76.50 $85.72 $40.67 $98.69
Maryland $300.97 $70.28 $91.00 $48.23 $91.46
Florida $298.70 $82.59 $82.61 $27.59 $105.91
New York $295.42 $49.66 $94.77 $40.42 $110.57
Colorado $293.59 $83.84 $77.10 $51.95 $80.70
New Hampshire $284.01 $70.49 $86.40 $45.46 $81.66
Massachusetts $274.82 $1.25 $103.76 $40.20 $129.61
Rhode Island $274.00 $69.34 $84.65 $56.28 $63.73
Delaware $260.77 $89.71 $73.43 $51.15 $46.49

 

Table 1: Price to fly in and out of each state broken out by components

 

Data and Methodology

The data presented in this analysis comes from Hopper’s combined feed of Global Distribution Service (GDS) data sources which includes about 10 million queries and 1 billion trips per day.  Demand is represented as the number of queries not actual ticket purchases, and is calibrated across all GDS sources for each market.  Round-trip airfares are represented by tenth-percentile prices.  For example, if the tenth percentile price is $800 dollars it means that only 10% of airfare searches are priced at or below this price.

The variables tested for correlation, to determine the most significant effects,  included: state area, state population (2012 est), median HH Income (2012), average distance flown, number of airports by state, population density and its inverse (area per capita), daily search demand, daily search demand per capita, inverse demand density (area per unit search), and proportion of consumer to business travel.  All metrics were measured using demand-weighted averages in both origin and destination states.  Linear regression modeling and standard significance testing was used to establish the relationships between relevant variables.

The median household income and population data is sourced from the U.S. Census Bureau, Current Population Survey, 2010 to 2013 Annual Social and Economic Supplements.

6 Comments

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