Your next flight could cost more even if oil prices fall: Here's what is changing

A reduction in the price of oil worldwide will not directly lead to lower prices for flight tickets. In addition to high prices for jet fuel, airlines have faced increasing costs of maintaining the planes, as well as late deliveries and high operating costs. According to an AP report, the director-general of the Association of Asia Pacific Airlines (AAPA) warned that pricey air tickets might be a new permanent characteristic of the aviation sector.

The companies try to cover their rising costs without raising the cost of tickets to the point where customers cannot afford them.

"Airlines will try their best to hold on to the fares that they can charge without trying to lose passengers, but it is a tricky dilemma," he said.


The industry currently operates in a much more expensive environment compared to the previous year. As Wong Hong stated, the prices for jet fuel had risen from about $80 to $180 per barrel, and the cost of fuel comprised nearly a third of the operating costs, according to AP.

Why could flight fares remain high even after oil prices fall?

A reduction in the cost of fuel does not necessarily mean that the price of the tickets will fall. Fuel is a substantial cost, but airlines need to take care of aircraft leasing, aircraft maintenance, airport costs, personnel and other operational costs.

According to Wong, aircraft delivery problems and costs incurred from the maintenance of old aircraft constitute another challenge for airlines. Airlines that will fail to get new aircraft in time can keep flying old aircraft, which will result in increased maintenance costs.

Thus, the challenge faced by airlines does not go away just because of reduced fuel costs. Even when airlines start saving money in terms of fuel, they can still encounter other costs that prevent them from lowering prices.

This implies that even with a reduction in the cost of crude oil, the cost of air tickets may not drop immediately. The airline needs to reduce its operating costs in general.

How are airlines managing rising jet fuel prices and ticket costs?

Airlines are faced with the dilemma of recovering increased operating costs and maintaining their customers, who are likely to be strained due to high travel costs.

According to AP, the large airlines in Asia-Pacific, Europe and North America have increased base fares, imposed surcharges on fuel or added other charges since the outbreak of war with Iran in late February.

However, additional charges can pose an extra risk as consumers may feel the cost of flying has become too much.

Wong explained to AP that airlines were attempting to keep the fares within customer-acceptable ranges in order not to drive demand. Moreover, according to him, there was no easy answer as to the possibility of implementing yet another increase in fares, as different markets had different price sensitivities.

This task becomes even more difficult taking into account the fact that tickets are usually sold months before flights take place. AP reported that consumers fix the fare rates well before airlines buy fuel needed for flights.

This means that airlines do not know the future cost of operating flights.

Could airline ticket prices come down if fuel becomes cheaper?

However, despite lower fuel prices potentially helping the airlines, one cannot be sure that the savings will immediately show up in fare reductions.

Airlines still have to factor in other costs such as maintenance and availability. How fast the fares react will be determined by the speed of the reduction in costs and how flexible the airlines are in setting their prices in different markets.

The state of demand is also significant.

As reported by AP, according to passenger traffic data, Asia-Pacific airlines recorded a decline in aggregate passenger traffic for five straight months from April through August. The region registered a slight recovery in September; however, for the first nine months, aggregate passenger traffic grew by 1.9% compared to last year.

In this light, the challenge that airlines face can be seen. Increasing fares helps cover the cost of fuel, but further fare hikes may turn off the passengers.

According to Wong, airlines struggle to find out how much of the extra cost they can pass on to consumers. This is especially hard when there are several airlines operating in the same market and offering alternative transport services.

What does this mean for travellers?

The prospect of high fares for long periods of time means that travellers will need to plan for air travel by looking at the full cost of flying.

Comparison between various airlines, dates and route options can help travellers find more economical choices. It is necessary to pay attention to the cost of baggage, seat selection fees and other surcharges instead of depending on the ticket fare alone.

The problems confronting the airlines do not stop at the increased fuel costs.

According to AP, delays in deliveries of aircraft and costly maintenance operations are increasing the cost pressures on the airlines despite their efforts to preserve their profit margins.

This means that low oil prices do not necessarily mean low air fares. Travellers can still be expected to pay higher fares even if the fuel market starts stabilising due to other cost pressures on the airlines.