It may be cheaper to fly this year depending on where you're going. Image: The Motley Fool.
After years of the airline industry slowly raising prices and fees for customers it may finally be time to see some discounts on flying in 2015. By all accounts flying in the U.S. is going to get cheaper as airlines begin to expand and fight for customers once again.
Depending on where you're flying, you could see significant savings over what you may have paid just a year ago. Here are the cities that are getting cheaper and why the discounts could last for quite a while.
Cities getting cheaper in 2015
A recent white paper by Expedia (EXPE 3.36%) looked at travel trends in the U.S. and found that 15 of 20 major destination cities are expected to be cheaper than a year ago.
The biggest decline in ticket prices this year are expected to be flights to Dallas, Tampa Bay, Denver, and San Diego. Flights to Dallas could fall double digits this year while the other three cities are going to see significant price declines.
|
Forecasted Price Change Y/Y |
Capacity Change Y/Y | |
|---|---|---|
|
Dallas |
-11.2% |
14% |
|
Tampa Bay |
-5.9% |
9% |
|
Denver |
-4.8% |
-0.1% |
|
San Diego |
-4.6% |
5.3% |
Source: Prepare For Takeoff: Air Travel Trends 2015 data from Expedia Internal Analysis.
The reason for the price decline is pretty simple: Supply of airline seats is rising. And that's something we should see more of this year with airlines adding flights and fighting for customers with lower prices.
More good news coming
The airline industry's consolidation and a recovery in demand the last few years has left airlines healthier than they've been in a decade. And low oil prices has reduced costs over the past year, so they're getting aggressive with expansion, hence the rise in supply.
Image: The Motley Fool.
The side effect from airlines adding flights is that they need people to fill the extra seats or they risk losing money. So they lower prices to compete.
Southwest Airlines (LUV 3.84%), which is typically one of the best operators in the industry, said its revenue per seat mile will fall 3% in the second quarter. With profits pouring in and demand for flights robust it's only natural that airlines would want to expand. But when everyone does it at the same time it can crush ticket prices quickly. American Airlines (UAL 5.61%) CEO Doug Parker said the industry is expanding too quickly and will have to lower prices to attract consumers.
That's bad news for airlines but great news for those of us who want to fly and I don't see any reason the capacity increases will slow down for at least the next year.
Airlines can't help themselves
Ironically, lower prices for airline tickets were bound to happen sooner or later. Airlines can't seem to help themselves in an effort to expand when times are good, which inevitably leads to a crash and a long history of bankruptcies.
But that cycle is great for consumers and that's being shown with lower ticket prices, especially to Dallas, Tampa Bay, Denver, and San Diego. Maybe if oil prices stay low and capacity continues to grow the lower prices will continue into 2016 as well.
