Air fares seen dipping thanks to oil slump
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 thanks to cheaper fuel and rising demand. As a result, they expect to cut the average ticket price by five percent in 2015, excluding surcharges and taxes.
That may not be a big decrease considering that the price of crude oil has fallen 40 percent since June, but is the most carriers can do for now, the International Air Transport Associated disclosed yesterday.
The association, which represents 240 airlines, or 84 percent of total air traffic, notes carriers are still stuck with contracts for fuel that pre-date the past months' price slump.
That's one reason why airlines have this year not cut ticket prices despite the oil price fall. In fact, as demand for flying remains strong, fares have been going up.
But things should start changing next year. That's when airlines' fuel costs will start reflecting the recent plunge in energy markets, says IATA's chief economist, Brian Pearce.
"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 told The Associated Press.
The airlines will still be making more money. They forecast record net profit of $25 billion next year, well above the $19.9 billion this year, the $10.6 billion in 2013 and $6.1 billion in 2012.
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