Airfares Drop With Fuel Prices, But Future’s Unclear

With airfares dropping early in 2015, some officials are optimistic that customers will continue to pay less compared to last year.

The International Air Transport Association, which represents more than 250 airlines globally, estimated that airfare could decrease as much as 5 percent compared to 2014 prices.

“The industry outlook is improving,” said Tony Tyler, the association’s director general and chief executive officer, at the end of 2014. “It’s a highly competitive industry, and consumers — travelers as well as shippers — will see lower costs in 2015 as the impact of lower oil prices kicks in.”

Travel website Orbitz.com reported last week that airline prices are down 3 percent right now compared to last year’s spring break. Passenger-advocacy groups, including Travelers United and FlyersRights.com, have called for a larger financial break.

“We have seen six months of steadily dropping gas costs,” said Paul Hudson, president of FlyersRights.com, in a February letter calling for greater savings for customers. “By any measure, the money saved by airlines should be reflected in lower airfares.”

Preliminary statistics show 1.3 million gallons of fuel were consumed by airlines in January, about 400,000 more than what was consumed in January 2014, according to the United States Department of Transportation.

Although more fuel was used at the start of this year, airlines paid $1.27 million less. Fuel also cost $1.97 per gallon in January, compared to the $3.04 per gallon reported in January 2014.

Despite pleas to drop prices, American-based airlines have not yet taken steps to pass along any of the fuel-related savings to customers. Singapore Airlines announced last month it would reduce fuel surcharges between $5 and $83 per sector depending on the distance and class of travel. Price changes went into effect Feb. 26.

Dr. Bijan Vasigh, Professor of Economics and Finance at Embry-Riddle Aeronautical University in Daytona Beach, Fla., thinks it’s too early to tell what airline tickets will cost and why for the whole year.

“I’m not really optimistic,” he said.

Vasigh said that just because fuel prices have dropped, it will not automatically result in a decrease in prices for the consumer. In addition to not knowing if fuel prices could swing back to higher ranges, Vasigh said there’s no real incentive for airlines to discount prices in the wake of major mergers like Southwest and Airtran or US Airways and American Airlines.

“They have the ability to sell the seat at the higher price because of the lack of competition,” he said.

This article appeared in print in the March 11th, 2015 edition of Hamodia.