This article talks about the predicted decrease in airline fares from
2015. This is mainly due to the fall in oil prices, which a lot of us had
already predicted. According to the International
Air Transport Association (Iata), average return fares for air
passengers will be 5.1% lower next year compared with 2014. The industry body represents 250
airlines, accounting for 84% of global air traffic. The major airline companies are expected to lower their
fares because higher profits as a result of cheaper fuel and faster global
growth. Iata also expects the global airline industry to report a record $25 billion profit next year. More
specifically, Iata's 2015 forecast
equates to an average 3.2% profit margin for airlines. Iata's
forecast also differed dramatically according to region, with North American
airlines expected to see profit margins of 6% next year while European airlines
are only expected to see profit margins of 1.8%, which Iata blamed on high
regulatory costs, infrastructure inefficiency and onerous taxation. Iata also said it expected global economic growth to
be 3.2% next year, up from 2.6% in 2014 - marking the first time it has exceeded
3% since 2010.
I agree that oil prices have a lot to do with the predicted decline of airline prices. However, I believe there is also an underlying trend that plays a role. A number of airlines are improving their efficiency as well as creating new cost structures for their customers. Delta Airlines recently split their aircraft into five new classes. These classes vary in price, restrictions and amenities. The new classes are (from cheapest to expensive) basic economy, main cabin, Delta Comfort +, Delta One and First Class. It seems more and more airlines are taking measures to promote higher revenues. The decline in oil prices is certainly not a detriment to this.
ReplyDeleteThere has been a lot of discussion recently about the effects of falling oil prices. The fact that airline fares will be decreasing is definitely good for consumers, as more people will be willing to fly. It will be interesting to see how much demand increases as prices decrease.
ReplyDeleteI have the same question Haley. While falling prices usually signal increased demand, not everyone will be able to utilize this phenomenon due to work schedules, family commitments, etc. It will be interesting to see how these lower prices will effect airline profits.
ReplyDeleteIt makes sense that airline fares are expected to go down with the recent drop in oil prices. As airline fares go down, demand will increase which is a positive for the consumer. Will the balance between lower fares ad increased demand be more or less profitable for airlines? That is something that will be interesting to see develop.
ReplyDeleteGod I hope this keeps prices low so maybe I can afford plane tickets! I cant't imagine a price change significant enough to negatively affect revenues and I really think that the decrease in prices could have a long-term positive effect because not only will the market potentially open up a bit more for people who couldn't previously afford to travel, the people who already travel can now afford nicer flight classes and spend more money on their own tickets. One can only hope that the encouraging financial numbers for the airline companies will give them some profit to put towards making some technology advancements so we keep making it easier to get around.
ReplyDeleteIt makes sense that airline prices are declining due to a fall in oil prices due to the excess supply. As consumers, this is great news, especially since airline tickets are relatively expensive, and in certain cases the only option. It also makes sense that they might break record on their profit next year, along with lower prices. Now that plane tickets can actually be somewhat more affordable, there will be a higher demand, and thus more profit for airline companies.
ReplyDeleteThis will be great for travel industry. This will increase consumer spending with more people flying, there will be more travelers and money spent elsewhere such as fancier hotels or more exotic destinations. The only losers of this situation are the oil companies that have been making extra billions the past couple years off the higher oil prices.
ReplyDeleteThis article makes sense in terms of airline fares being reduced as a result of falling oil prices. But is this the main reason for the price reductions? The article mentioned airlines are becoming a more efficient industry overall so maybe airline prices were already falling and the oil prices are speeding up that process.
ReplyDelete