Airlines Hold Fares High as Jet Fuel Costs Retreat

London, 18 August 2026 — EBM Newsdesk Analysis —Nick Staunton

Airlines are resisting pressure to reduce ticket prices despite a sharp retreat in jet fuel costs, as carriers attempt to protect margins after one of the aviation industry’s most volatile periods since the pandemic.

The cost of jet fuel in northwest Europe has fallen to roughly $1,300 a tonne, having reached almost $1,900 during the conflict with Iran. Brent crude has also retreated to around $90 a barrel. Yet passengers have seen little corresponding reduction in fares or the fuel surcharges introduced when energy markets surged.

The result is an uneasy pricing stand-off. No major airline wants to move first because an initial fare reduction could force competitors to respond, triggering a broader price war just as carriers begin recovering some of the additional costs accumulated earlier in the year.

The Financial Times reports that demand has remained resilient despite higher fares, giving airlines little immediate commercial incentive to pass falling fuel costs on to passengers.

Why cheaper fuel does not mean cheaper tickets

Air fares are determined by demand, competition and available capacity—not simply by the price of oil.

Fuel may be one of the industry’s largest expenses, but airlines also face higher wage bills, aircraft-leasing costs, airport charges and increasingly expensive maintenance. Engine problems and delayed aircraft deliveries have forced some carriers to lease replacement aircraft for longer than expected, leaving costs elevated even as fuel markets ease.

European airlines have also been partially protected from daily price movements through hedging contracts. These arrangements allow carriers to lock in fuel prices months in advance, limiting their exposure when markets rise but delaying the benefit when prices fall.

This means the decline in the spot price of jet fuel will not immediately flow through to airline accounts. Some carriers are still purchasing fuel under contracts agreed when prices were considerably higher.

The global average jet fuel price recently stood at almost $159 a barrel, according to IATA’s weekly fuel monitor. The industry body has forecast an average price of $152 a barrel for 2026—nearly 70 per cent above the previous year.

Capacity gives airlines pricing power

The stronger explanation for persistently expensive tickets is constrained capacity.

Some carriers have reduced planned flying after the fuel shock, while aircraft and engine shortages continue to limit how quickly fleets can expand. IAG, the owner of British Airways, is among the airline groups moderating capacity on selected routes.

When fewer seats are available, airlines can maintain higher fares even if one of their principal costs declines. Premium and long-haul demand has also remained relatively strong, allowing traditional network carriers to defend prices more successfully than some budget rivals.

European carriers nevertheless remain under financial pressure. During the first half of 2026, fuel costs increased by 12.3 per cent at IAG, 16.3 per cent at Air France-KLM and 18.1 per cent at Lufthansa, according to industry analysis. In every case, fuel costs grew faster than revenue.

Low-cost airlines face a more difficult calculation. Cutting fares could stimulate demand and capture market share, but it could also deepen pressure on margins. Ryanair, for example, carried more passengers during its latest reported quarter but suffered lower average fares while operating costs increased.

Passengers may have to wait

The present stand-off is unlikely to last indefinitely. If demand weakens after the peak summer season or airlines restore capacity more quickly than expected, competition should force fares lower.

But passengers should not assume that falling oil prices will automatically produce cheaper flights. Airlines price tickets at the highest level the market will bear, not by applying a fixed margin to their fuel bills.

For now, carriers appear determined to retain the benefit of easing energy costs. The first airline to break ranks may offer passengers some relief—but it also risks starting a fare battle that the rest of the industry is working hard to avoid.