• 5 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 7 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 7 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 8 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 9 hours VW Fails To Secure Critical Commodity For EVs
  • 10 hours Enbridge Pipeline Expansion Finally Approved
  • 11 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 12 hours OPEC Oil Deal Compliance Falls To 86%
  • 1 day U.S. Oil Production To Increase in November As Rig Count Falls
  • 1 day Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 1 day Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 1 day EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 1 day Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 1 day Aramco Says No Plans To Shelve IPO
  • 4 days Trump Passes Iran Nuclear Deal Back to Congress
  • 4 days Texas Shutters More Coal-Fired Plants
  • 4 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 4 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 4 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 5 days Renewable Energy Startup Powering Native American Protest Camp
  • 5 days Husky Energy Set To Restart Pipeline
  • 5 days Russia, Morocco Sign String Of Energy And Military Deals
  • 5 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 5 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 5 days India Needs Help To Boost Oil Production
  • 5 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 5 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 5 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 5 days District Judge Rules Dakota Access Can Continue Operating
  • 6 days Surprise Oil Inventory Build Shocks Markets
  • 6 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 6 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 6 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 6 days Oil M&A Deals Set To Rise
  • 6 days South Sudan Tightens Oil Industry Security
  • 7 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 7 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 7 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
The Next Big Digital Disruption In Energy

The Next Big Digital Disruption In Energy

Blockchain technology is transforming the…

Who’s Winning The Electric Vehicle Race?

Who’s Winning The Electric Vehicle Race?

Automakers and suppliers of automotive…

Air Fares Unchanged By Low Oil Prices

Many oil-producing countries may be fretting over the falling prices of their product, but nearly everyone else is enjoying this development. Except, perhaps, air passengers, who may or may not see lower fares in the coming year.

The International Air Transport Association (IATA) reports that the drop in jet fuel prices should boost the industry’s profit margins to a record $25 billion after taxes, or an average profit of 3.2 percent. Profits expected by the end of this year will be $19.9 billion, the association said.

Average airline profit margins haven’t been this high since 2010, when they were 3.1 percent.

So far there’s been no relief for passengers, IATA says, mainly because carriers are still using fuel that they bought months ago at higher prices. Since June, the average price of crude oil has plunged from about $115 per barrel to under $70 now. But in 2015, the group says, it expects an average oil price of about $85 per barrel.

Related: Oil Wars: Why OPEC Will Win

“The industry outlook is improving,” IATA CEO and Director General Tony Tyler said in a statement on Dec. 10. “The global economy continues to recover and the fall in oil prices should strengthen the upturn next year.”

Still, Tyler cautioned, “While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2 percent 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.”

For example, IATA said the airline industry in North America is expected to perform the best next year, due in large part to industry consolidations. North American airlines’ profits are seen reaching $13.2 billion, up from the $11.9 billion expected this year. In Europe, though, the margin is likely to be 1.8 percent, IATA said, due to “high regulatory costs, infrastructure inefficiency and onerous taxation.”

And what about air fares? That’s simple: IATA says average fares for air passengers probably will be 5.1 percent lower in 2015 than this year, once the airlines use up all the fuel they bought earlier at higher prices.

Yet John Heimlich, IATA’s chief economist, noted that airlines, especially those based in the United States, have been busy reinvesting in themselves at the highest rate in 18 years, including improvements to planes, upgraded airport infrastructure, along with increased dividends to shareholders and more pay for employees.

Related: EIA Oil Production Numbers Show Global Slowdown

“It is critical to make the investments now and capitalize on the current environment,” Heimlich told The New York Times.

Besides, airlines lack the motivation to reduce fares. Thanks to mergers in the industry, many flights are now full, demonstrating a demand that can fetch a high price.

In fact, one trade group, Airlines for America, argues that air travel is relatively inexpensive even at today’s prices when adjusted for inflation. It reports that while overall consumer prices in the United States have risen 35 percent since 2000, air fares have gone up by only 22 percent. This includes the many fees the airlines have tacked on to fares to increase revenues.

So despite the drop in fuel prices, it’s an even bet whether your next airline flight will cost you less.

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News