Airfares are falling across the globe but that isn’t affecting the financial performance of North America’s airlines, according to a new report by IATA. Average global airfares fell 4.5% in 2015 when adjusted for the higher US dollar and are expected to continue to decline this year as fuel hedging contracts unwind, said IATA. Airlines are seeing enough of a benefit from lower fuel prices that they can afford to cut ticket prices without eating into revenues. This is reflected in the strong financial performance of airlines in Q4 of 2015. Net post-tax profits in IATA’s sample group were up almost 60% compared to a year earlier, led by the North American airlines, which report an aggregate operating margin of 15%. The only region that didn’t see an improvement in financial performance was Latin America. <br/>
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US airlines are trying to harness low fuel prices to power their bottom lines. That might not be as simple as it sounds. Low oil prices mean that major airlines are less interested in using derivatives to hedge their exposure to fuel-cost fluctuations. Delta Air Lines said last week it has closed its hedges altogether, while United Continental and Southwest Airlines have scaled back their use of such contracts. In this regard they are catching up to American Airlines, which has eschewed the use of such safeguards since 2014. Certainly, there are valid reasons for airlines to pursue this strategy. Fuel is the largest expense for an airline, and low prices have provided an earnings tailwind. And with passenger unit revenues on the decline after a long climb higher, management teams need to find new ways to keep the bottom line growing. <br/>
Incheon International aims to have 110 airlines operating from it by 2020, with more than 10m transfer passengers, making the airport Asia's top air hub. Incheon International said Monday that to reach that goal, it would seek to open berths for airlines flying to China, Italy, France and Iran, which have a growing number of travellers wanting to visit Korea. Aiming to have 66m passengers by 2020 from the 49m now, the corporation will expand the number of carriers operating in and out of Incheon from 90 in 2015 to 110. Since the airport opened in 2001, the number of transit passengers has been rising at an average 6.4% a year until 2013. But the figure declined from 7.71m in 2013 to 7.25m in 2014 because of more direct flights operated by LCCs. <br/>