Fuel Costs Are Dropping — So Where Are Those Lower Airline Fares?


Someone’s saving money from lower jet fuel prices, but it’s not passengers. (Photo: Thinkstock)

“Fuel prices are dropping!” excited airline analysts were exclaiming. “Ticket prices are going to fall! Consumers are going to save! And air travel is going to get cheap again!”

Someone forgot to tell the airlines.

As jet fuel prices have dropped up to 50 percent since this summer, at this moment only a few major airlines — including Virgin Australia and Qantas — have dropped the fuel surcharge, the “temporary” fee airlines tacked on to ticket prices when fuel prices exploded a few years ago. And Time.com reports Virgin Australia and Qantas are merely boosting ticket prices to compensate for the fuel surcharge — meaning flyers won’t notice much of a difference.


Virgin Australia and Qantas say they’re eliminating the fuel surcharge. But don’t expect to save a lot on fares. (Photo: Andrew Thomas/Flickr)

As for U.S.-based carriers, they like their fares as they are, thank you very much. American Airlines said flat-out last week they won’t be passing on their massive fuel savings (an estimated $5 billion compared to last year, according to the Wall Street Journal) to flyers. Instead they will be pocketing the money to buy back shares, pay down debt, invest in improvements, and maybe buy new planes.

Related: Attack of the Airline Baggage Fees: Can You Escape Paying Big Bucks to Check Bags

Critics are already dinging the airlines for their lack of generosity. In an open letter to airline CEOs, whimsically titled “Stop Fueling Around,” consumer groups Travelers United and FlyersRights.org accuse the airlines of “cartel-like behavior” and demand they bring airfares in line with lower fuel costs.


American Airlines has said flat-out, lower fuel prices won’t lead to lower fares. (Photo: Getty)

Don’t hold your breath. Decreased competition among the airlines (the big four U.S. air carriers control more than 80 percent of the market) and sky-high demand (an estimated 659 million passengers flew domestically in 2014, a 2.3 percent increase over last year) mean the airlines have absolutely zero motivation to lower fares right now, even with lower fuel costs.

Some optimistic analysts have noted that many airlines are still locked into fuel contracts that began when prices were still high. They theorize that when the airlines finally start seeing those lower fuel costs we might see some fare reductions. But statements from airlines (like American Airlines) that refuse to pass along any fuel savings, and the meager fare reductions by airlines (like Virgin Australia) that did, aren’t encouraging. If air travelers want to see significant savings from the falling gas prices, they’ll probably be better off driving.

WATCH: U.S. Airlines Anticipate Massive Fuel Savings Despite Costly Hedges

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