Airlines likely to bank fuel savings from Iran deal rather than lower ticket prices

Airlines are likely to bank fuel savings from the U.S.-Iran interim peace deal rather than immediately cutting ticket prices, a dynamic driven by limited capacity. After oil prices fell on the agreement, U.S. jet fuel spot costs dropped to US$2.85 per gallon on June 17 from an early-April peak of US$4.88. If that decline persisted, Reuters calculations indicate the U.S. industry could save more than US$40 billion annually on fuel. Still, fare increases appear to have lagged fuel cost spikes: jet fuel rose more than three times as fast as airfares from January through May. Deutsche Bank estimated carriers would recover about 60 cents per extra fuel dollar, with Alaska recovering roughly one-third and major U.S. carriers around 40%–50% in the second quarter. The key risk is whether airlines can hold higher prices as fuel eases.