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The Geneva-based International Air Transport Association (IATA) said today it expects airline fares to drop while at the same time predicting record profits for the airlines to continue.
IATA, which represents most of the world's airlines and a cumulative 84 percent of all air travelers, projected that airlines will make $19.9 billion this year and a whopping $25 billion next year - a good chunk of it thanks to falling fuel prices and rising demand among travelers.
But the savings to the consumer will be minimal and certainly not in line with the dramatic drop in oil. IATA said the airlines will cut fares as much as five percent, which doesn't sound like much once you realize the cost of a barrel of oil has dropped 40 percent since June.
Yet the trade group also said airlines are unable to pass on too much savings as many, if not all, carriers are locked into fuel prices that pre-date the drop in oil prices.
"It's going to be six months or so before airlines are seeing lower fuel costs, and at that point consumers are likely to see a fall in travel costs," Brian Pearce, IATA's chief economist, told The Associated Press.
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