Why the world is paying more for plane seats
By Andrew O’HehirJ.
Morgan Chase & Co. is betting that the world will pay more for its jets than it did last year.
The bank, the largest financial firm in the world by assets, on Thursday said it expects the average annual increase in seat prices for commercial and private jets will reach more than $2,500 this year, compared with $1,500 last year and $1 and $2 in 2018.
The world’s biggest airlines have seen their profits tumble in the wake of the economic crisis, which has caused soaring fuel prices and forced them to raise fares.
Jet fuel is currently about $10 cheaper than it was at the start of the year, but airlines are expected to continue raising fares to try to offset the effects of the collapse in global oil prices.
“Our research suggests that as the economy improves, the demand for seats will increase significantly, and as such, the average price for seats on commercial jets will rise,” David A. Pomerantz, the bank’s chief economist, wrote in a research note.
“This will translate into an increased number of seats on the market, as well as a greater demand for aircraft seats in general.”
The bank forecast that global aviation prices will rise by $1.6 trillion to $1 trillion in 2019, compared to the $1-trillion increase forecast for the same period last year, due to a “favorable economic climate” and “unexpectedly low interest rates.”
J. P. Morgan, the biggest U.S. bank by assets and the largest U.K. bank, has forecast that U.B.T. seats will become a key way to access the country’s economy.
In the U.Y.C.A. study, the company estimated that seats would become the most popular type of seat in the 2020 Olympics.
While U.C.-Boulder’s findings are encouraging, it is worth noting that J.P.-Morgan’s forecasts for 2019 were based on a baseline assumption that airlines would increase seats prices.
P.-Morgan has estimated that its forecasts for 2020 are based on more accurate projections of the economy.
The Bank of America study is based on the assumption that the U-Boulder study is a better estimate of the UBS-KPMG survey of U.N. airlines.
The report also found that UBS and the World Bank are projecting a “negative trend” in the global economy, meaning that the global supply of aircraft seats will fall.
Jurisdictions are taking action to address the cost of seat seating, with New Zealand and Australia now considering measures to address their financial burden.
New Zealand will introduce a tax on fuel and airline seat purchases, while Australia will introduce tax on foreign airlines’ fuel purchases.
Meanwhile, Singapore, which had already made major changes to its tax regime in order to combat its rising fuel costs, announced that it will introduce an additional tax of 3 percent on fuel purchases by foreign airlines.
Singapore also plans to introduce a new tax on the purchase of seats for domestic flights.
UBS and other financial analysts predict that demand for jet seats will grow, partly because of lower costs.
“Demand for jet seat is likely to increase because of the favorable economic conditions, lower fuel costs and a reduction in interest rates,” Pomerant said in the bank report.
More from the Wall Street Post:The Bank of England will hold a meeting of its monetary policy committee next week, a senior official said, in an indication that the central bank will not take another stimulus measure until the economy is growing.
In a speech to the British parliament on Wednesday, the Bank of Japan’s governor, Haruhiko Kuroda, called for the central banks “to provide more stimulus.”
He also said that the Japanese central bank would cut interest rates from a record high of 6.75 percent in late June to 0.75% next month.
As of March, the United States had the third-highest debt-to-GDP ratio in the developed world behind Japan and China.
Read more from the Financial Times.