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Experts: Falling oil prices lead to cheaper air fares

New York - Airline industry experts say there is light at the end of the tunnel with tight economic forecasts and that is plummeting oil prices leading to reduced plane ticket prices.

They say there are prospects for an even bigger bonanza of consumer-friendly fares in the coming months.

With fuel prices down by two-thirds from the dizzying heights of mid-2014, when oil topped $100 per barrel, the once cash-strapped airline industry is now reaping record profits.

Jet fuel

Increased competition also have helped coax down once stubbornly high fares, the experts say.

"We've seen typical domestic prices drop about 14% over the past year," said Patrick Surry, chief data scientist at Hopper, the airfare prediction app.

"The drop in fuel prices is a major factor, along with increasing competition from low cost carriers, both domestically and internationally," Surry said.

Experts say fuel makes up about a third of an airline's costs. With oil and jet fuel costs down two-thirds since last year, airlines can expect to reduce their overhead by about 20%.

Some of the best bargains are for air fares to popular US travel destinations like Chicago, New York, Los Angeles and San Francisco, cities where competition is stiff.

Good deals can also be had on routes to the southwestern US energy meccas of Houston and Dallas, where the slowdown in the oil business has led to discounted air fares.

Some companies said they are using the windfall in fuel costs to reduce debt and to make needed re-investment in their infrastructure.

"We are utilising our cash to continue to secure our future," said Gerry Laderman, senior vice president at United Airlines.

"In 2015, we prepaid $1.2bn of debt, including $300m in the fourth quarter."

Likewise, Richard Anderson, CEO at Delta, said of his company: "Our focus on our long-term goals is unwavering. We will continue to re-invest in the business at an appropriate level to sustain long-term growth."

The US Bureau of Labour Statistics in a report in January said air fares by foreign travellers on US airlines fell 15% in 2015, the largest calendar-year drop since the index was first published in 1987.

The decline in ticket prices was steepest for air travel to Latin American and Caribbean (down 17.8%), but there were also big drops in fares to Asia (down 14.6%) and Europe (down 11.7%).

Low fares

Travel industry experts said that the relatively low prices were likely to continue throughout 2016, including an anticipated 23% drop in the price of air fares to Rio this summer, just in time for the Olympic games.

But there will be plenty of bargains for those travelling to other destinations as well, said Scott Kirby, president of American Airlines.

"There's lots of low fares in the market," the airline CEO told reporters.

"Consumers are having a field day in this environment," he said.


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