People who value cheaptravel options, such as cheap airplane tickets, cheapdeals, cheapvacation packages, and discounttravel deals, will be pleased to hear that industryanalysts expect airfares to remain low for the near future.
Airline ticket prices fell almost 6 percent from Junethrough July; the largest month to month drop in airfares since December 1995.
Ticket prices are expect to remain low through the fall,with average round trip domestic ticket prices through November expected to bearound $249, equal to about 3 percent less than last fall.
Reasons for lower airfares include low fuel prices,increasing competition from low cost domestic and international airlines, andinternational financial instability.
The cost of jet fuel on July 31st was down 47percent from a year earlier. Even if theprice of crude oil does not continue to fall, some major U.S. airlines stillforecast significant decreases in their fuel costs in the coming months astheir hedged fuel positions expire.
Delta Air Lines is one of the airlines positioned tobenefit. It experienced almost $600million in settled hedge losses during the first half of the year, contributingto the airlines calculated fuel expense of $2.65 per gallon. Delta has announced that it expects fuelexpenses for the remainder of the year to be around $1.90 to $2 per gallon.
United Airlines is also looking forward to reduced fuel coststhis fall. The airline expects fuel inthe third quarter to be about $2 per gallon vs. $2.15 during the first half ofthe year.
Spirit Airlines grew its available seat miles from June 30thof last year to June 30th of this year by 30 percent. Allegiant Airlines experienced a 17 percentincrease in available seats, while JetBlues seat capacity grew by almost 8percent. Legacy U.S. airlines (namelyAmerican, Delta, and United) have increased their seat capacity over the lastyear by 3 percent or less.
International pricing pressure has grown as the competitionhas increased. Norwegian Air, whichflies out of six U.S. airports, has more than doubled the number of passengers itcan transport on its long haul routes over the last 12 months. Wow, an Iceland based discount airline,entered the U.S. market this year with flights from Boston and Baltimore.
Increasing competition from international low cost airlineshas resulted in some exceptionally cheap deals. Wow recently offered $207 one way ticket prices from Boston toParis.
Instability in world financial markets threatens to curtailthe increase in international air travel that low airfares typicallyinduce. Chinas decision to devalue itscurrency in mid-August resulted in significant declines in stock markets aroundthe globe. Chinas slowing economy,coupled with the perceptions of nervous investors, could negatively impact airtravel, placing even more pressure on cheap airline prices.
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