Even if the fragile peace between the US and Iran holds, travel advisors shouldn’t expect airfare relief anytime soon.
Despite a sharp drop in jet fuel prices—from a high of $4.88 USD per gallon to $2.85 USD—analysts tell Reuters that airfares are likely to remain “well above” pre-war levels as airlines prioritize rebuilding margins over lowering prices.
According to Reuters, the decline in fuel costs is expected to save the global airline industry roughly $40 billion annually. However, carriers are using those savings to offset earlier losses rather than pass them on to consumers—meaning lower oil prices won’t translate into cheaper tickets for clients in the near term.
“It’s not a simple cause-and-effect relationship. Oil coming down by 10 percent doesn’t mean prices come down by 10 percent.”
Jet fuel prices skyrocketed in February after Iran closed the Strait of Hormuz in response to US and Israeli attacks. Airlines responded with fuel surcharges, higher fares and increased baggage fees, but have not been able to recoup the additional costs incurred in recent months.
Data obtained by Reuters shows that jet fuel prices increased three times as fast as airfares between January and May, with Deutsche Bank estimating that US airlines will only recover 60 cents of every additional dollar spent on jet fuel, pitting increased revenue of nearly $14.5 billion against additional fuel costs totalling $24.1 billion.
Experts who spoke to the New York Times echoed that sentiment, indicating that airfares will remain elevated until carriers recover costs incurred during the first half of 2026.
“The costs of operations are baked in now for the next three or four months for most airlines, with little room to be able to maneuver,” John Grant, chief analyst at OAG, told the publication.
“It’s not a simple cause-and-effect relationship. Oil coming down by 10 percent doesn’t mean prices come down by 10 percent,” he said.
According to Bloomberg, domestic airfares in Canada have increased 17% this year, even as major airlines like Air Canada, WestJet and Air Transat cut capacity in an effort to reduce costs.
