Headley, and his co-author, Brent Bowen of Embry-Riddle Aeronautical University, have been tracking the performance of airlines for 27 years. Their report is considered one of the benchmarks of the industry because it uses data collected by the U.S. Department of Transportation to measure how airlines are doing compared to each other and previous years.

"Without a doubt 2016 was a very good year for the airlines," said Dean Headley, associate professor at Wichita State University, one of the authors of annual report.

Just look at how airlines have performed in the latest Airline Quality Rating.

In 2016, airlines posted their best numbers ever in critical areas like baggage handling and denied boardings.

"A big reason why we saw fewer travelers bumped from flights is because the leaders of these airlines have changed their philosophy in recent years," said Headley. "They no longer have the attitude that bumping a passenger is ok because there's not another customer around the corner."

Another reason airlines are doing better is because reports about mishandled bags are at an all-time low. One factor to that improvement is carriers like Delta incorporating new technology such as luggage tags with RFID chips, which makes it easier to track bags.

Finally, passenger complaints to the DOT are also down, including those about airfares.

Headley says this is further proof travelers in America are noticing how much airfares have dropped.

"The average airfare for a domestic flight in the U.S. last year was $344. That's down 8 percent compared to 2015," said Headley.

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