Will reduced oil prices lead to cheaper flights?
According to new research by Travelzoo, the answer’s a resounding 'no'.
Last week, Chancellor George Osborne announced that the five year low cost of oil should be passed on to the consumer via lower flight prices, sparking much debate about potential reductions to flight costs.
However, Travelzoo predicts that the main beneficiaries will be travellers who opt for a driving holiday either at home or on the continent, and that flight prices are not likely to drop in the immediate future.
Joel Brandon-Bravo, Travelzoo’s UK managing director, said: "For the major airlines we would however expect some softening of the headline price in the medium term, as the fuel surcharges will inevitably fall.
"At this stage the only immediate benefit will be for those who opt for a driving holiday - especially if they drive to Europe where the weak euro is also offering good savings on accommodation and food."
Travelzoo’s flight Deal Experts don’t anticipate dropping flight prices for the following reasons:
- Just because oil prices are down now doesn't mean they won’t spike quickly in the future
- Airlines ‘hedge’ their oil purchasing, so the cost is fixed for a period of time. They won’t adjust their fares based on market rates when the cost is fixed as it doesn’t make sense for them
- Fuel’s just one of the components that affects fare pricing
- Passengers are still getting great value; many airlines are re-investing their profits into improving their services, such as kitting planes out with WiFi
- Airlines have no need to lower prices; demand for flights remains high.