Last updated: 01:30 PM ET, Fri March 13 2015

Airfare Down Only Slightly Despite Declining Fuel Prices

Airlines & Airports | Patrick Clarke | March 13, 2015

Airfare Down Only Slightly Despite Declining Fuel Prices

Airfare has dipped three percent compared to this time last year, according to an Orbitz report via Caitlin Dineen of the Orlando Sentinel.

However many consumers still feel that the slight drop doesn't reflect the savings airlines have experienced in the wake of dropping fuel prices over the past few months. 

According to preliminary statistics from the U.S. Department of Transportation, airlines consumed roughly 40,000 more gallons of fuel this past January than they did in January 2014. Despite that fact, airlines paid $1.27 billion less in January 2015 than they did the previous year. 

A big reason for that is because fuel cost just $1.97 per gallon this past January, compared to $3.04 per gallon reported in January 2014.

But savings are savings in the eyes of passenger advocates. 

"We have seen six months of steadily dropping gas costs," said president Paul Hudson last month. "By any measure, the money saved by airlines should be reflected in lower airfares."

At the end of last year, the International Air Transport Association's director general and CEO Tony Tyler said "the industry outlook is improving" and that "consumers—travelers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kicks in."

The IATA represents hundreds of airlines worldwide and estimates that airfare costs could decrease by five percent this year compared to 2014.

But while Tyler is optimistic that savings are on the horizon for air travelers, others aren't holding their breath.

"I'm not really optimistic," said economics and finance professor Dr. Bijan Vasigh, who points out that it's too early to expect accurate projections for the remainder of the year. 

Instead, Vasigh highlights a number of key factors that will ultimately determine whether airfare costs drop over the course of 2015.

The lack of certainty surrounding future fuel costs and shortage of incentive for airlines to discount prices are among the top reasons for pessimism. While fuel prices have been low of late, the potential for them to rise, a relative lack of competition and steady demand for air travel allow airlines to essentially charge what they want.

"They have the ability to sell the seat at the higher price because of the lack of competition," said Vasigh.


For more information on United States

For more Airlines & Airports News


You may use your Facebook account to add a comment, subject to Facebook's Terms of Service and Privacy Policy. Your Facebook information, including your name, photo & any other personal data you make public on Facebook will appear with your comment, and may be used on Click here to learn more.

Discover Club Med All-Inclusive Vacations

Hotels & Resorts