After fare drops in 2015, air travelers will enjoy more dips in global airfares this 2016 due to lower fuel prices, according to the International Air Transport Association (IATA). The industry association says that competition among airlines will contribute to the fare declines in the first half of 2016.
Crude oil prices recuperated in the past few weeks, but the current rates are still approximately 30 percent lower compared to 2015 figures.
In January, the average round-trip domestic airfare increased by 2 percent, $457 month over month, according to airfare forecast app Hopper's Consumer Airfare Index. The figures for international airfares surged by 4.2 percent to $804.
Comparing the recent figures to those of February 2015, domestic airfares dropped by 2.5 percent. The international airfares remained almost the same. In U.S. dollars, the two airfares dropped approximately 11 percent.
Airfare fluctuations are expected as we near the peak summer season. However, the continuous drop in fuel prices will keep the airfares lower than in previous years.
Patrick Surry, the chief data scientist of Hopper app says there could be 3 to 5 percent drop in global airfares this year. Surry adds that airfare prices in Canada can drop more than the ones in the U.S.
"The mitigating factor in Canada is the competitiveness of the market is not necessarily as strong as some other markets so it may take longer for those price drops to filter through because the airlines obviously don't need to pass on their fuel savings right way," adds Surry.
For instance, two of Canada's biggest carriers, WestJet Airlines and Air Canada, have been reducing their airfares recently. In the first quarter, WestJet Airlines fares are spiraling down approximately 9.5 percent. The airline is using the reduced airfares to spark a demand and fill their carriers, particularly in the western part of Canada. On the other hand, Air Canada's airfares are declining by 3.7 percent. However, the lowered fares are applicable to select domestic routes and transborder flights.
Regardless of reduced fares, the industry documented a 60 percent global profit increase in the last quarter of 2015. A huge chunk of the global profit increase was pulled in by the North American airlines.