Airline ticket prices may stay high as carriers bank fuel relief from Iran deal

Airlines stand to save billions of dollars on jet fuel after an interim US-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. The United States 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. US jet fuel spot prices stood at $2.85 a gallon on June 17, down sharply from an early April high of $4.88. A decline of that size would cut the US airline industry’s annual fuel bill by more than $40 billion if sustained, according to a Reuters calculation based on industry fuel consumption. Fares still lag fuel As jet fuel prices surged, US airlines raised ticket prices and bag fees, and cut schedules, but those steps have offset only part of the rise in fuel costs. Industry data show jet fuel prices rose more than three times as fast as airfares from January through May. Deutsche Bank estimated US carriers would recover only about 60 cents of every additional dollar spent on fuel $14.4bn in higher revenue against $24.1bn in higher fuel costs. Alaska Air said it was recovering about one-third of the increase, while Delta Air Lines, United Airlines and American Airlines put second-quarter recapture at about 40 per cent to 50pc. JetBlue Airways and Frontier Group expect to recover less than half. United CEO Scott Kirby told Reuters his airline was getting closer to recouping the fuel-cost spike through pricing: “We’re on a path to recovering 100pc by the end of the year.” Raymond James data shows average domestic fares booked one week before travel were up 34.1pc from a year earlier as of June 8. The key question is whether airlines can keep recent fare increases as fuel prices ease. “What remains crucial is the ability to hold price,” Melius Research analyst C