Airplanes have to depend on fuel to function, and many people are wondering if decreasing oil prices are stifling growth in the travel industry. Since the sectors are complementary, one would assume that a fall in cost in one would trigger falling price in the other.
2015 oil and airfares
Over the past months and even a few years, the price of oil has steadily declined worldwide thus making drivers pay less at the pump. Thursday the global equity market went up as the price of oil increased. This is in keeping with an upcoming meeting that will be taking place shortly between major oil producers. It is hoped that the meeting will help to stabilize markets in the troubled petroleum industry.
Jet fuel has been going down for some time now and this is what makes airfares lower. Airfares have not been this low since 2009, and passengers can thank low fuel costs for that.
Meanwhile in the U.S., the Bureau of Transportation and Statistics reports that in 2015 plane fares dropped to $372. The bureau says that, in that same year, international plane fares went down 15%. Airlines such as Delta Air Lines (DAL, Financial) paid $1.85 per gallon for fuel in 2015, which is a decrease of 30% compared to the 2014 price.
In 2015, the industry saw top U.S. airlines such Delta Air Lines, Southwest Airlines (LUV, Financial), American Airlines (AAL, Financial) and United Airlines (UAL, Financial) making a whopping $22 billion in profits. In baggage and change fees, the U.S. airlines industry bagged a sizable $1.6 billion.
Some people in the U.S. travel to different parts of the world often, especially during the winter season. Therefore, not only do airlines flourish during these times, but restaurants, museums and hotels where they can get hot hotel deals.
2016 oil and airfares
Since the price of fuel was dropping so fast in 2014 and 2015, Delta predicted that in 2016 it would be paying about $1.20 per gallon for fuel. This prediction made many travelers very happy thinking that airfares would continue to fall. However, this was not the case but rather the opposite, which left many passengers feeling disappointed.
Since the beginning of 2016, Delta increased its airfares and blamed the increase on rising labor costs. U.S. airlines are employing more people because the industry is picking up at a reasonable fast pace. The airline industry has now started to reap bigger profits because of the drop in prices of crude oil.
Although many people are complaining that oil is lower than it was in previous years and thus plane fares should drop, airlines will continue to attract passengers who are willing to pay the extra bucks to travel to their destination.
The bottom line
As 2016 continues and fuel drops even lower, the price of traveling in the sky might prove too costly for some people. Airlines experts are predicting that prices will continue rising since CEOs in the industry are concerned more with making higher profits than looking out for passenger sentiments.
As competition rages on among airlines in the U.S., flight price will play an important role. The airline that gives more benefits including lower plane fares will be the airline of the choice for many people.
