Virgin has cut fares on flights from Australia to Los Angeles by AUS$40 (£20) for economy fares and AUS$50 (£25) for business class, commenting that it is lowering fares in anticipation that fuel costs remain at lower levels rather than the record highs seen in recent years.
However, despite oil prices falling by roughly 50%, other airlines are yet to follow suit.
EasyJet says that as it hedges the majority of its fuel, it is yet to benefit from the fall in the price of crude. A spokesman said: "As at November 19 2014, we had bought 80% of our fuel until the end of September 2015 (at US$944 per metric tonne) and 58% for the period October 1 2015 to 30 September 2016 (at US$921 per metric tonne) so oil price fluctuations will only have an effect on less than 20% of our fuel this financial year and less than half our fuel in our 2016 financial year."
Executives and analysts at the Airline Economics conference in Dublin said that carriers would keep prices high as long as there was sufficient demand, except when paring back fuel surcharges on long flights. As a consequence, the global airline industry is expected to report a near US$5bn increase in profits this year.
Peter Davies, former Chief Executive of Air Malta, said: "Ticket prices are market-driven not cost-driven," adding that lowering fares was not necessarily the correct response to lower oil prices. IATA expects that air fares will fall 5.1% this year, after drops of 3% in 2014 and 6.2% in 2013. This is in keeping with the general downward trend of airfares, however, so no extreme changes are anticipated that might reflect the extreme drop in fuel prices. It would seem it may be a while before the record low oil prices start to benefit airline customers, if indeed they ever do.
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Will dropping fuel costs mean cheaper flights? Not likely…
As a result of plunging international oil prices cutting its fuel costs, Virgin Australia is already lowering its ticket prices, but will other carriers will follow suit?
