Analysts said there was little or no incentive for U.S. carriers to reduce prices when the aviation sector is freshly consolidated, highly disciplined and hugely profitable
Lower fuel prices also have the effect of increasing airlines’ tolerance for risk, which can manifest itself in a variety of ways, including adding capacity or lowering fares. This should mean lower fares to come. IATA is projecting a 5% overall drop in airfares worldwide in 2015 thanks to lower fuel prices and an improving global economy.
Low fuel prices might encourage some airlines to jump on the opportunity to increase capacity by hanging on to older, fuel-inefficient aircraft that they might have otherwise retired as new planes come online.
However, there is little or no incentive for the carriers to cut fares at a time when the aviation sector is freshly consolidated, highly disciplined and hugely profitable, at least in North America.