IATA estimates air fares will fall by 5% in 2015 due to falling oil price
IATA says global air fares are expected to drop next year as falling oil prices and strong worldwide GDP growth help airlines post record profits. The price of oil has fallen by over 40% since June and may fall further, depending on OPEC. IATA anticipate air fares (excluding taxes and surcharges) will fall 5.1% on 2014 levels. IATA said due to the “highly competitive” nature of the airline business, savings made will be passed onto travellers. They expect the profits of the global airline industry will reach $25 million in 2015, which equates to a 3.2% profit margin. On a per passenger basis, airlines will make a net profit of $7.08 in 2015. That is up on the $6.02 earned in 2014 and the $3.83 per passenger in 2013. IATA also increased its profit forecast for 2014 to $19.9 billion, up from its earlier prediction of $18 billion. However, IATA consider a margin of 3.2% is small and doesn’t leave much room for “deterioration in the external environment before profits are hit”. However, as many airlines “hedged” their fuel supplies in advance, many continue to have to pay prices above the current market price for some months, delaying price cuts.
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Air fares to drop 5% in 2015 – IATA
By Tom Newcombe
10 Dec 2014 (Buying Business Travel)
Air fares are expected to drop next year as falling oil prices and strong worldwide GDP growth help airlines post record profits, according to the International Air Transport Association (IATA).
The Geneva-based trade body are predicting return air fares (excluding taxes and surcharges) will fall 5.1% on 2014 levels, as consumers benefit from strong industry performance and lower industry costs.
IATA said due to the “highly competitive” nature of the airline business, savings made will be passed onto travellers.
It comes as an IATA outlook report shows profits for the global airline industry will reach $25 million in 2015, which equates to a 3.2% profit margin. On a per passenger basis, airlines will make a net profit of $7.08 in 2015. That is up on the $6.02 earned in 2014 and more than double the $3.83 earnings per passenger achieved in 2013.
IATA also increased its profit forecast for 2014 to $19.9 billion, up from its earlier prediction of $18 billion.
“The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year,” said IATA director general Tony Tyler.
However, Tyler warned that a margin of 3.2% is small especially when there are a number of risks to the aviation industry such as political unrest, conflict and weak regional economies. He added it doesn’t leave much room for “deterioration in the external environment before profits are hit”.
“Stronger industry performance is good news for all. It’s a highly competitive industry and consumers—travellers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kick in.
“Airline investors will see ROIC move closer to the WACC. And a healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last,” he added.
http://buyingbusinesstravel.com/news/1023510-air-fares-drop-5-2015-iata
Air fares set to fall in 2015
Savings made on plummeting oil prices will be passed on to passengers, say carriers
10 December 2014 (Guardian)
Airlines are stuck with contracts for fuel that pre-date the price slump of the past months.
Flying could get cheaper next year as airlines say they will finally start passing on some of the savings made on plummeting oil prices.
Carriers are forecasting record profits for 2015 due to cheaper fuel and rising demand and they expect to cut the average ticket price by 5%, excluding surcharges and taxes.
The International Air Transport Associated (Iata) admitted on Wednesday that the probable fare reductions may not be big considering that the price of crude oil has fallen by 40% since June, but is the most that carriers can do in the short term
The association, which represents 240 airlines – 84% of the world’s air traffic – says that carriers are stuck with contracts for fuel that pre-date the price slump of the past months.
As demand for flying remains strong, fares have instead been going up, but Iata chief economist Brian Pearce said there were likely to be changes once fuel costs started to reflect the recent oil price fall. “It’s going to be six months or so before airlines are seeing lower fuel costs and, at that point, consumers are likely to see a fall in travel costs,” Pearce said.
http://www.theguardian.com/business/2014/dec/10/air-fares-set-to-fall-in-2015
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