Airlines stand to save billions of dollars on jet fuel after an interim U.S.-Iran peace deal sent oil prices lower, but passengers are unlikely to see immediate relief as tight capacity may allow carriers to keep fares well above pre-war levels.
Reuters – The U.S. market offers the clearest example. Fare increases still lag this year's run-up in fuel costs, while domestic seat growth remains limited. That gives airlines leeway to use lower fuel bills to rebuild margins rather than reverse recent price increases.
Outside the U.S., fare relief is likely to be uneven. Lower crude prices will take time to feed through to jet fuel, and unless jet fuel falls back toward start-of-year levels, airlines are likely to keep fares firm or push them higher where demand allows, said Dudley Shanley, head of aviation and travel research at Dublin-based Goodbody.
Europe may see a split. Long-haul fares are more likely to ease because airlines passed on higher fuel costs more successfully on those routes, RBC analyst Ruairi Cullinane said. Short-haul fares may prove firmer if the peace agreement supports bookings and demand.
In Asia, HSBC analysts said China's big three airlines face weak pricing power and falling aircraft utilization, while Hong Kong's Cathay Pacific (0293.HK) is better placed as higher fares, cargo revenue and premium demand could offset fuel costs.
