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Sliding fuel costs could mean lower airfares next year, airlines say

Airfares could drop 5% next year, an airline trade group predicts

With fuel prices dropping and airline profits soaring, travelers could reap the benefits with a 5% drop in fares next year, according to a trade group for the world's airlines.

The International Air Transport Assn. in Geneva reported that the world's airlines were on pace to post a combined net profit of $19.9 billion this year, rising to $25 billion next year.

The prediction is a dramatic turnaround for an industry that was buffeted by bankruptcies and mergers in its effort to stay afloat for more than a decade after the Sept. 11 terrorist attacks and the more recent global recession.

But the picture now has improved; global fuel prices have dropped 33% over the last year and domestic travel demand has jumped nearly 4% in the same period, according to the IATA.

The trade group predicted that tough competition and stronger profit margins should result in fare drops of 5.1% in 2015 compared with this year.

"Stronger industry performance is good news for all," said Tony Tyler, director general and chief executive of the IATA. "It's a highly competitive industry and consumers -- travelers as well as shippers -- will see lower costs in 2015 as the impact of lower oil prices kicks in."

So far, airlines have not passed their financial windfall on to passengers because demand for air travel remains steady and airline executives worry that fuel prices could shoot up again because of war, bad weather or other calamities that can disrupt oil production, according to industry experts.

In the U.S., the average domestic airfare rose 2.5% to $396 in the second quarter, compared with the average fare of $386 in the same period in 2013, according to the latest statistics from the U.S. Department of Transportation.

To read more about travel, tourism and the airline industry, follow me on Twitter at @hugomartin

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