Why Flight Prices Might Not Fall After the U.S.-Iran Deal

The preliminary U.S.-Iranian deal could lower fuel prices, but don’t expect cheaper flights anytime soon.The conflict caused jet fuel prices to nearly double, forcing airlines to operate fewer flights and raise fares.The framework deal American and Iranian officials are expected to sign on Friday would restore oil exports from the Middle East, but airlines may not see their fuel bills drop for months.Even when fuel does become cheaper, airlines may not reduce fares for a long time because they want to recover the money they spent and have figured out that travelers are willing to pay more for tickets anyway, aviation experts said.“The costs of operations are baked in now for the next three or four months for most airlines, with little room to be able to maneuver,” said John Grant, chief analyst at OAG, an aviation data provider.

He added: “It’s not a simple cause-and-effect relationship.Oil coming down by 10 percent doesn’t mean prices come down by 10 percent.”Jet fuel is one of the biggest expenses for airlines, generally accounting for 25 to 35 percent of the cost of flights.

When fuel prices soared after the war, airlines absorbed some of that cost and covered the rest by raising fares.But many carriers have little incentive to cut prices now, because customers have been willing to pay higher prices.The U.S.-Iranian agreement would unclog the Persian Gulf by reopening the Strait of Hormuz, through which about 20 percent of global seaborne jet fuel exports pass, said Amaar Khan, European head of jet fuel pricing for Argus Media.

But after months of fighting, shippers may be hesitant to send vessels and workers back into the Persian Gulf.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.A...