Air fares to fall worldwide as capacity rises and oil prices drop

8 July 2015

Economy class air fares will fall in almost every region this year due to a combination of lower oil prices and increased capacity, according to research.

Travel consultancy Advito’s update to their annual Industry Forecast said while lower oil prices were encouraging airlines to increase capacity, this has not been mirrored by a growth in demand, and airlines are now making more lower priced seats available.

Advito monitors changes in economic growth, inflation, travel demand and oil prices and each quarter, it revises its annual forecast to reflect changes to the original air and hotel pricing predictions for the year.

The travel consultancy originally predicted moderate air fare increases as demand was expected to grow more quickly than capacity in North America. Advito lowered the figures In this update explaining that growing airline profits make it more difficult for them to justify increased published fares.

It also said the strengthening of the US dollar is holding back global economic recovery.

Recent stable oil prices may soon face downward pressure through the prospect of Iran re-entering the global market, weaker demand from China and the growing risks of a Greek EU debt default, Advito said.

Hotel demand remains weak in Europe, and Advito predicted more subdued rate increases. In Australia, demand is proving stronger than expected, and Advito has raised its forecast for southwest Pacific from a 2-4 to 3-5 per cent rise.

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