It could be a while before airline fares drop despite a decline in oil prices following the Iran agreement and it all has to do with the demand, according to GasBuddy analyst Patrick De Haan.
Airlines Could Drop Fares
Quoting a post by a user on X on Wednesday, De Haan said that airlines had optimized their capacity due to “high fuel prices/summer,” adding that he expects a handful of deals for “less utilized routes.”
De Haan said that a “full drop in fares” was difficult, at least until demand dropped sometime in August, but “moreso in the fall when there will be way more capacity than demand.”
In the same thread, De Haan also described how steep domestic flight fares were compared to international flights. The analyst said that it would be cheaper to fly from Chicago’s O’Hare International Airport to Naples in Italy when compared to flying from Newark to Florida.
“Prices have dropped from over $1200 to under $800,” De Haan said, sharing prices of international flights to Italy from the U.S.
Airfares And Iran War
Analysts have echoed similar comments on airfares, saying that prices may not go down soon because operators did not have enough incentive to lower prices due to strong demand.
Experts have also suggested that airline ticket prices have been shaped by the recent collapse of Spirit Aviation Holdings Inc. (OTC:FLYYQ) in May, which removed a source of cheaper tickets for flyers.
The uncertainty around the Strait of Hormuz has also resulted in Shipping costs surging. Data suggests that the market average cost of shipping a 40-ft container from the Far East to the U.S. West Coast was recently at $4,047.
Oil, Gas Prices
Oil prices fell on Thursday, with the West Texas Intermediate (WTI) crude oil falling below $70 to 69.87/bbl at press time. Brent crude oil also fell to $72.98/bbl at the time of writing this article. According to data from Airlines for America on June 24, jet fuel costs $2.83/gallon.
Meanwhile, the national average for a gallon of gas was at $3.9180 on Thursday, according to data from the American Automobile Association (AAA). Prices remained above $5/gallon in states towards the Pacific, like California and Washington.
Check out more of Benzinga’s Future Of Mobility coverage by following this link.
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