Airfares are expected to fall by approximately 5% in 2015.
According to the latest global forecast from the International Air Transport Association (IATA), a fall in oil prices will allow airlines to cut their costs and pass the savings on to the consumer.
Airlines are expected to post a collective global net profit of US$25 billion in 2015, up 26% from the projected US$19.9bn earnings in 2014. And after adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall 5.1% next year, compared to 2014 levels.
Tony Tyler, IATA’s director general & CEO, welcomed the findings but urged caution.
“The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year,” said Tyler.
“While we see airlines making US$25bn in 2015, it is important to remember that this is still just a 3.2% net profit margin. The industry story is largely positive, but there are a number of risks in today’s global environment —political unrest, conflicts, and some weak regional economies among them. And a 3.2% net profit margin does not leave much room for a deterioration in the external environment before profits are hit.”
On a per passenger basis, airlines will make a net profit of US$7.08 in 2015 – higher than the US$6.02 earned in 2014, and more than double the US$3.38 per-passenger earnings achieved in 2013.
The IATA forecast is based on projections of an average oil price of US$85 per barrel in 2015. If that assumption is correct, it would be the first time the price has fallen below US$100 per barrel since 2010.
This will reduce jet fuel prices to an average of US$99.9 per barrel in 2015 for a total industry fuel spend of US$192bn – 26% of total industry costs.