Air fares may drop

The International Air Transport Association (Geneva SZ) said airlines are on target to make a net profit of $19.9 B this year and $25 B next year. Global fuel prices are down 33% this year and demand for air travel (domestic) is up nearly 4% according to the IATA. The airlines have not passed on the savings as of yet probably because the demand for air travel is steady. If there is a change a 5% drop in prices could occur.

 

I would love that. But I (and you must) realize that for many years they took lumps for fuel charges being so high and prices not keeping up.....it would seem SOME reduction would be necessary but certainly it could not reflect the massive drop in oil all at once.

I would like them to fortify their retirement funds with the surplus and ensure their futures as well. But you know how greed is.....

 

They will hold until either airlines start poaching routes or the latest upstarts join in thinking they will make $. Currently, demand is high and margins are good. This is always short term until we see an existing entity expand there routes or a new entity enters. This cycle has been going on since deregulation. As long as flights are full, why would an airline reduce fees?

 

I read something similar to this over the weekend, airlines start to add routes, then discount to fill the planes. However, with all of the airline mergers, there is less competition among the legacy carriers. Spirit, Frontier, and Allegient will continue their race to the bottom.

 

I would not bet on an across the board price drop in the near term. Maybe more Southwest "sales", and maybe other airlines run a few promos, but nothing much. Remember Airlines often pre negotiate their fuel to get an idea of costs so they might not be seeing a lot of the savings that the average consumer is. Also jet fuel doesn't have the same price drop that auto gas has. Their are fewer refiners and supply is pretty stable, so yes the crude is cheaper but the cost of jet fuel won't go down as much.
If they cut fares now, they will have to raise them if oil costs rise. Consumers react negatively to that. The airlines have full planes so they have no need to cut fares across the board. It would be nice though.

 

I don't exactly recall the airlines absorbing the gas increases. I do recall fee madness, including fuel surcharges, rolling out at that time. I did read it will take about six months for the airlines to start benefiting from the lower cost of oil. By that time, somebody will figure out a reason to artificially jack the rates back up.

 

Delta bought a refinery near Philly, I wonder how that's working out for them?

 

When pigs fly . Kidding but right now as long as demand is up I doubt passengers will reap the benefits of the lower oil prices. I seriously doubt I will see price drops from Hawaii. Hawaiian Air usually drops prices quarterly for a few days (week) but raises prices back up when the flights fill up so they can still drop prices during those periods and still make money.

The low oil prices are a boon for the airlines, they can make a lot more money, like you said maybe they might feel sorry for the passengers (sitting in their narrower and cramped and less padded seats :evillaugh) and throw us a bone and drop prices one day.

Guess I'm not going to the CES this year, airline prices from Honolulu are in the $800's r/t during the CES.

 

Chuck Schumer is on it as he has asked the DOJ and DOT to investigate "whether airline mergers have contributed to the steep prices by lowering competition and to see why low fuel prices are not helping consumers."

Personally I don't see airline prices dropping to quickly/much at all. Companies have to answer to stock holders/Wall Street. They will continue to do what they are doing until further notice.

 

That ship has sailed: US Airways & American, Delta & Northwest, United & Continental, Southwest & AirTran, what did the regulators expect? The ultra low cost carriers will give us alternatives.

 

I'm not so worried about the mergers as am I that there is no way for alternatives to the big players to emerge. You really can't start an airline these days and it's hard for the smaller guys to gain a foothold even when some airlines have an unreasonable amount of control over gates in some airports.

 

Airlines are a sexy ego driven business. Despite the fact the industry has a zero percent return on investment there is always someone who thinks he can make a buck. Boeing et al are always looking for customers, finance companies are looking for places to lend their money, boneyards have operable planes and secondary airports are looking to fill their gates.

It's not as difficult to get into the biz as we might assume. Once someone sees a biz with high margins, it's not long before someone new enters. Most fail but a few stick around.

It's a fascinating industry from manufacturing to finance to operations and marketing.