Wednesday, 10 December 2014

Air Fares Set to Fall in 2015

Stand by for a fare reduction revolution!  According to travel experts the average return fares for air passengers will be 5.1% lower next year compared with 2014!
 
Major airlines are expected to cut and reduce fares early next year thanks to higher profits as a result of cheaper fuel and faster global growth.  IATA - The International Air Transport Association, expects the global airline industry to report a record $25bn (£15.9bn) profit next year.
The Global aviation body also increased its profit forecast for 2014 to $19.9bn, up from its earlier prediction of $18bn - good news for all, including the travelling public. 
"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.
The last time the industry reported a profit margin close to IATA's prediction for next year was in 2010, when it reached 3.1%.
However, Mr Tyler said the 3.2% margin did not leave much room for deterioration before profits were hit, pointing out that political unrest, conflicts and some weak regional economies all posed a risk.

IATA - The industry body represents 250 airlines, accounting for 84% of global air traffic say the state of the global industry varies dramatically according to location. North American airlines expected to see profit margins of 6% next year, by far the strongest performance globally.
In contrast, European airlines are only expected to see profit margins of 1.8%, which the association blames on "high regulatory costs, infrastructure inefficiency and onerous taxation". The UK for example has the most heavily taxed airline industry than almost any other country in the world. 
The recent fall in the oil price is set to provide a welcome boost to airline's profits through cheaper fuel prices. Brent crude oil has fallen more than 40% since June, and today slipped below $66 a barrel! 
However passengers will have to wait to see the benefit of the falling fuel prices as the vast majority of airlines buy fuel in bulk in advance for a set price - or hedging as it is known, so it could be a while before the fare come tumbling.
 
 

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