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Airline fares set to fall in 2015, Iata predicts | |
(about 3 hours later) | |
Average return fares for air passengers will be 5.1% lower next year compared with 2014, the International Air Transport Association (Iata) has said. | |
Airlines are expected to trim fares thanks to higher profits as a result of cheaper fuel and faster global growth. | |
Iata now expects the global airline industry to report a record $25bn (£15.9bn) profit next year. | |
The body also increased its profit forecast for 2014 to $19.9bn, up from its earlier prediction of $18bn. | |
Upturn strengthening | |
Iata's 2015 forecast equates to an average 3.2% profit margin for airlines. | |
"The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year," said Iata director general Tony Tyler. | "The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year," said Iata director general Tony Tyler. |
The last time the industry reported a profit margin close to Iata's prediction for next year was in 2010, when it reached 3.1%. | The last time the industry reported a profit margin close to Iata's prediction for next year was in 2010, when it reached 3.1%. |
However, Mr Tyler said the 3.2% margin did not leave much room for deterioration before profits were hit, pointing out that political unrest, conflicts and some weak regional economies all posed a risk. | However, Mr Tyler said the 3.2% margin did not leave much room for deterioration before profits were hit, pointing out that political unrest, conflicts and some weak regional economies all posed a risk. |
Cheaper fuel | Cheaper fuel |
Iata's forecast also differed dramatically according to region, with North American airlines expected to see profit margins of 6% next year, by far the strongest performance globally. | Iata's forecast also differed dramatically according to region, with North American airlines expected to see profit margins of 6% next year, by far the strongest performance globally. |
In contrast, European airlines are only expected to see profit margins of 1.8%, which Iata blamed on "high regulatory costs, infrastructure inefficiency and onerous taxation". | In contrast, European airlines are only expected to see profit margins of 1.8%, which Iata blamed on "high regulatory costs, infrastructure inefficiency and onerous taxation". |
The recent fall in the oil price is set to provide a welcome boost to airline's profits through cheaper fuel prices. | The recent fall in the oil price is set to provide a welcome boost to airline's profits through cheaper fuel prices. |
Brent crude oil has fallen more than 40% since June, and on Wednesday slipped below $66 a barrel, just above a five-year low. | Brent crude oil has fallen more than 40% since June, and on Wednesday slipped below $66 a barrel, just above a five-year low. |
Iata said it expected airlines to spend $192bn on fuel next year, down from an expected $204bn this year. | Iata said it expected airlines to spend $192bn on fuel next year, down from an expected $204bn this year. |
However, Mr Tyler told the BBC that the airlines were unlikely to be seeing the benefits yet. | |
"Airlines fuel prices are based on previous months oil price so they're probably not seeing results from the falling oil price just yet. It's also varied because some [airlines] are thoroughly hedged [against the oil price] and some won't be." | |
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. | |
The industry body represents 250 airlines, accounting for 84% of global air traffic. |
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