Air fares set to fall, says Iata

Air fares set to fall, says IataImage via Shutterstock

Lower oil prices and stronger worldwide GDP growth are helping boost global airline profitability and are set to trigger a fall in fares.

Airlines are expected to post a collective global net profit in 2014 of $19.9 billion – up from $18 billion projected in June, according to latest Iata projections.

The figure looks set to rise to $25 billion in 2015.

“Consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through,” Iata said.

Average return air fares, excluding taxes and surcharges, are expected to fall by some 5.1% on this year’s levels.

The expected $25 billion net post-tax profit represents a 3.2% margin. Airlines will make a net profit of $7.08 per passenger next year against $6.02 earned in 2014 and more than double the $3.38 earnings achieved in 2013.

The return on invested capital is expected to grow to 7% from the 6.1% expected to be achieved in 2014.

Iata director general and CEO Tony Tyler said: “The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year.

“While we see airlines making $25 billion 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.”

He added: “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.

“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.”

Sourced from Travel Weekly


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