Why haven’t airfares dropped amid oil fall?

Reports have been swirling over the last several days regarding the price of future airline tickets – as the price of oil continues to decline. While there is no certainty regarding when oil prices will finally level out – the price of airfare has been expected to lower with the lower cost of oil.

However, it hasn’t been happening like that – at least not yet. Carriers are beginning to forecast though that the savings could begin to get passed onto fliers next year. The current expectation is that the cost will reduce itself by roughly 5% on the average ticket price. Interestingly, many have questioned whether this should have already happened – as the price of oil has been in a steady decline for nearly one year. Adding fuel to the consumer fire around airfare prices is the fact that airliners have been enjoying record profits, as well.


Airliners though have suggested that the reason for the delay in lower the price of airfare is due to working from contracts on oil that predate the price slump that has been happening for several months now – much more aggressively than in years past. Another contributing factor, according to the airlines, is demand and what the rest of the market is doing with prices.

Brian Pearce a Chief Economist for the International Air Transport Association pointed out that “It’s going to be six months or so before airlines are seeing lower fuel costs, and at that point consumers are likely to see a fall in travel costs.” However, the simple math shows that a 5% decrease isn’t nearly as profound as one might imagine, or expect when the price of oil – per barrel is trending over 40% less than what it was just a year ago.


Senator Chuck Schumer of New York is now urging the Department of Justice and Department of Transportation to begin investigating the reason why airlines have not lowered their airfares – despite record profits, and tumbling fuel costs. In a press conference in New York City, Schumer said, Fuel costs make up about half of an airline’s total costs, and so with dramatically lower fuel prices and a major rise in profits, it’s safe to say that the airlines can afford to pass at least some of these savings onto the consumer.”


Many within the industry, and even those who have simply watched the market though for a long period of time took great offense to the notion that the airlines could be colluding in any way. Despite his allegations, the reasoning that airlines are working from oil contracts that ultimately predate any change or fall in oil prices firmly supports the current pricing of tickets.

Customers should not worry though as the prices will definitely be on the fall over the course of the next six months.