Air fares could drop this year - operators
Aviation experts fuel a plane that crash-landed at Kiwawu along Mityana Road last year, after it ran out of fuel. Airline operators predict a cut in fares owing to falling oil prices. PHOTO BY ABUBAKER LUBOWA
What you need to know:
Reduced. Consumers are already enjoying fare cuts in Asia-Pacific region
Kampala. Passengers in Uganda may spend less on air fares this year, airline operators have said.
Talking to Daily Monitor recently, Mr Mbuvi Nguze, the chief executive officer Kenya Airways, said ticket prices could drop, although gradually, owing to the fall in the global prices of crude oil.
“There will definitely be some adjustments in headline prices of tickets through the fuel surcharge. It may, though, not be the same as the oil market drop,” he said.
A fuel surcharge is an extra payment which guarantees that an airline will stay profitable during the fluctuation of fuel prices. Oil prices are currently below $50 (about Shs142,750) per barrel after six months of sharp decline.
Ms Clare Misire, the country manager of Fly – SAX, a new operator on the lucrative Entebbe – Nairobi route, echoed Mr Nguze’s confirmation. She was, however, quick to add that the prices of aviation fuel, which are a determinant factor, have not changed. “We are still buying a litre of aviation fuel at $1.1 (about Shs3,132). If the price goes any lower than this then the fares will reduce,” she said.
A report published by the International Air Transport Association (IATA) in December 2014, forecast that average return airfares in 2015 will be lower by 5.1 per cent compared to last year. The report attributed this to the dropping oil prices and strong worldwide Gross Domestic Product growth
The report also foretold that that profits for the global airline industry will reach $25 billion (about Shs71 trillion) in 2015, which equates to a 3.2 per cent profit margin. Airlines, on a per passenger basis, are expected to make a net profit of $7.08(about Shs19,900) in 2015. That is up from the $6.02 (about Shs17, 100) earned in 2014 and more than double the $3.83 (about Shs10,800) earnings per passenger achieved in 2013.
According to IATA, airlines are expected to spend $192 billion (about Shs547 trillion) on fuel this year, which is less than the $204billion (about Shs582 trillion) spent last year.
The cuts
In the Asia - Pacific market, consumers are already enjoying the predictions of the report. On Monday, AirAsia announced that it had scrapped fuel surcharges, thus travellers would spend less on airfares. The embattled airline company was responding to an earlier decision by its competitors Japan Airlines, Virgin Australia and Qantas to scrap the surcharge. It’s predicted that the decision could encourage other aviation markets to follow suit.
