Consumers shouldn't expect to see cheaper holiday airfares despite a drop in the price of jet fuel, one analyst says.
The price of oil is hovering around $66 U.S. per barrel — a decrease of about 35% since the summer — but airlines aren't seeing the big savings on jet fuel that would inspire them to pass the benefits of that oil price drop on to passengers in time for Christmas.
With the Canadian dollar at a five-year low, airlines are also having to spend more to get the required amounts of fuel. That drop in purchasing power effectively cancels out the oil price drop, leaving airlines with few savings to pass on to passengers hungry for a holiday deal.
"We've almost offset the reduction in jet fuel by the impact that we're seeing on the weaker Canadian dollar," said WestJet CEO Gregg Saretsky.
Saretsky didn't rule out the possibility of future fare drops if oil prices stay low, saying he and other airline executives around the world are watching carefully to see whether lower oil prices are here to stay.
Another industry official agreed, saying it all comes down to whether the low dollar and oil prices can get to a point the airlines will consider a happy medium.
While that won't happen in time for the holidays, one official said consumers could start seeing some small reductions in airfare over the next several months — in the area of 2-3%, he says.
However, fares probably won't drop much more than that given public willingness to pay higher costs for air travel.
