What will the New Year bring?

As US airlines look back over 2005, they will no doubt hope that this year will go down as a particularly bad one. High fuel prices, large labor costs and tough competition from low-cost carriers have depressed results all round.

Next year however, may well be a little brighter. After all, a number of airlines have successfully managed to reduce their labor costs. UAL, for example, projects 2006 costs to be 44% lower than in 2002, according to BusinessWeek Online. Such cuts would enable them to offer much more competitive fares and win back some of the domestic market share they have lost to low-cost carriers.

Additionally, most carriers have been reducing their capacity, which should help align supply and demand, something that has been rather imbalanced of late. Although for the consumer it may mean having to dig a little deeper into their pockets.

Of course, the risk of another bad hurricane season yet again propelling fuel prices remains, but at least this time everyone will be affected, as even Soutwest Airlines fuel hedging program draws to an end.