Will Low Oil Prices Reduce Flight Prices?

This week it was announced that oil prices were at their lowest for 6 years.

However, before we all get too excited about cheaper holidays, the Chancellor, George Osborne, believes that air passengers won’t see the benefit.

Why not? we hear you cry. Especially given that petrol prices were lowered almost immediately after the announcement.

During the last 12 months, the price of crude oil has fallen by around 50% - it currently trades at around $50 per barrel. Such a reduction would make a massive impact on the price of an air ticket.

However, airlines, in particular those who fly to long-haul destinations, have kept tight lipped about any potential savings being passed on to the traveller.

Their reasoning? Well, they say that they have to agree to fixed-price contracts months, even years in advance, so they aren't benefitting from the falling oil price.

Several airlines have spoken out to defend themselves, no doubt before passengers start to bombard them with angry questions over air prices, and before too much of a media storm kicks up.

A spokeswoman for IAG, the parent company of British Airways, said, "Fuel supplements have been around a long time and we have never covered the increase in fuel costs since prices started increasing 10 years ago. The current drop in oil prices has not had a significant effect on our overall costs. We are a euro-based group so we buy in euros and therefore we are being affected by the strength of the US dollar."

Whilst a spokesperson for Emirates said "Like all airlines, Emirates offers a variety of fares throughout the year depending on market forces."

There is one airline however that has reduced its air fares, albeit very slightly.

In December, Virgin Atlantic reduced its fuel surcharge by £10, claiming that whilst it did not see the benefit of oil prices falling, because they buy their fuel months in advance, they had made the reduction in honour of their outstanding customer service and competitive pricing.

In the meantime, until airlines renegotiate their fuel prices, hopefully still at this low, low price, we must wait and see if air travellers will see a drop in air fares in the forthcoming months… We will all wait with baited breath!