Airfares Are Dropping – And So Are Airline Share Prices

Open Jaw

According to airline organization IATA, flyers will continue to enjoy lower airfares in 2016, after a global drop of about 5% last year.

IATA says recent declines in oil prices mean further fare cuts are likely in 2016, which will help to stimulate demand. If sustained, the most recent declines in oil prices - to 12 yr. lows - would reduce the industry’s annual fuel bill by approximately $12 billion in 2016.

By IATA’s numbers, as 2015 closed the picture looked pretty sweet for the airlines: 

  • Financial results from Q4 2015 point to a strong end to the year, with big profit gains in North America and Europe.
  • Passenger traffic in 2015 enjoyed its strongest growth in 5 years.
  • The passenger load factor averaged a record high over the year, which alongside a lower break-even load factor, helped to drive strong financial performance.

Despite all those positive metrics, worldwide airline share prices fell by 10% in January, albeit alongside widespread sell-offs in global financial markets. But it’s also the case that given the aviation industry’s profit history, there’s always the fear that something sweet can quickly turn sour.

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