Wait, are Airfares Going Up or Down Next Year?

I love predictions as much as anyone but of course, the further out the event, the greater the speculation. Well, the year 2015 is literally only a couple weeks away but there is anything but consensus about the direction of airfares.question_mark

This source, citing AmEx Global Business Travel, says prices will rise next year. Expect to pay more for airfare, hotel accommodations, and ground transportation.

Not so, according to another article. International Air Transport Association (IATA) says airfares will actually decline over 5% next year. They base this on far lower fuel costs as well as global growth.

IATA represents the airline industry worldwide so it might make sense they would offer such a rosy picture. On the other hand, there is economic reality. There is simply no reason to believe that the airlines will lower their fares just because their operating costs are going down. C’mon, has anyone seen Starbucks lower their prices when the cost of coffee was in decline?

In fact, the airlines are not making as much money on the reduced fuel costs because of hedging. Most carriers have locked in much higher prices for fuel so while they will benefit from lower prices, it is not as much as the market price for fuel suggests.

My betting money is on higher airfares. Yes, it will create a windfall to some airlines but other than a few carriers that will remove fuel surcharges – which are truly unconscionable today – I expect higher travel costs all around next year.

What’s your prediction?

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