Low Oil Prices Not Reflected in Airfares

Despite fuel prices dropping to below $80 this week - nearly half the historic high of $146 seen earlier this year - British Airways, Virgin Atlantic and Aer Lingus have left their prices unchanged.

BA's long-haul fuel surcharge is a staggering £218 return. The last time oil was at less than $80 (September 2007), the fuel surcharge with BA was just £86 for a long-haul return flight.

BA maintains that its fuel bill will rise to £3 billion this year (up by a £1 billion on last year). It adds that the market is volatile and the pound's weakening against the US dollar has not helped (most of BA's fuel costs are in dollars), but it maintains that its fuel surcharges remain under constant review.

In the panic that followed predictions this summer that oil would reach $200 a barrel, airlines rushed to hedge their fuel costs (buying it in advance at fixed price) by purchasing vast amounts of oil at prices around the $130 mark.

With the benefit of hindsight, it appears they were far too hasty. Analysts from Merrill Lynch now predict that fuel could fall as low as $50 a barrel next year.

Author: Jo Amey