Falling oil prices have already made millions of consumers happier about fueling their vehicles, but market conditions are poised to improve another area of travel: flying.
The International Air Transport Association (IATA) projected higher-than-expected profitability for the airline industry in 2014, which IATA anticipates will translate into reduced airfares in 2015. In June, IATA projected profits to hit $18 billion in 2014, but a Dec. 10 news release puts the new projected profits at $19.9 billion. IATA expects airfares to fall 5.1% below 2014 ticket prices, after adjusting for inflation, and excluding taxes and fees.
Much of those earnings relate to falling oil prices, which have already started to trickle down into airfares, said Tom Spagnola, travel expert at CheapOair, an online travel-booking service.
“Twenty-five percent of an airline’s cost is fuel, so with the savings that they’re going to achieve in 2015 pretty much sets the benchmark of where pricing is going to be in in the next year,” Spagnola said. (IATA and Airlines for America, a trade association for airlines, put fuel costs at 26% of a ticket’s price.)
For travelers who passed on booking flights in 2014 because of high costs, it might be time to reconsider those trips. Five percent may not seem like huge savings, but if you’re booking multiple tickets, those lower prices will make a difference.
“Five percent for a thousand-dollar ticket, and you have four people going — it’s a tremendous savings in this industry,” Spagnola said.
Airlines are also increasing capacity in 2015 to accommodate a 7% increase in passengers, IATA projects. That uptick will spark competition and also contribute to lower airfares, Spagnola said.
For those who have been browsing flight prices recently, you may have already noticed lower fares. Spagnola said the fuel-related discounts started to emerge after Thanksgiving, even though fuel prices started falling months earlier, and airlines will continue to capitalize on the trend.
You can further save by using a credit card with travel rewards, though these types of cards aren’t for everyone, because they carry high interest rates and often come with annual fee. Still, if you have good credit and will pay your statement balances in full, they can be useful money-saving tools. Not to mention that using credit cards responsibly can help you build your credit. You can see two of your credit scores for free with updates every 30 days on Credit.com.
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