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Why Flight Prices Might Not Fall After the U.S.-Iran Deal
The New York Times • • business
Key Points:
- The preliminary U.S.-Iranian deal is expected to restore oil exports from the Middle East, potentially lowering jet fuel prices in the future, but airlines may not see immediate cost reductions.
- Despite falling fuel costs, airlines are unlikely to reduce ticket prices soon as they aim to recoup previous expenses and have found that customers tolerate higher fares.
- Jet fuel accounts for 25 to 35 percent of airline operating costs, and recent price surges forced airlines to raise fares and reduce flights, with operational costs locked in for several months.
- The reopening of the Strait of Hormuz, a critical route for about 20 percent of global seaborne jet fuel, could ease supply constraints, though shippers may be cautious about returning to the region after recent conflicts.
