The US and Iran have agreed to end their conflict and reopen the Strait of Hormuz. Oil prices are falling. But travel agents should not be telling clients to hold off booking in the hope that airfares will follow.
When the US and Iran signed their peace agreement on June 18, many travellers assumed cheaper flights would be just around the corner. The logic seemed straightforward: less conflict means lower oil prices, lower oil prices mean cheaper jet fuel, cheaper jet fuel means cheaper tickets.
It is not that simple, and travel agents who understand why will be better placed to guide their clients.
What has actually happened to fares
When the conflict began on February 28, jet fuel costs nearly doubled almost overnight. Airlines responded by raising fares, cutting routes, and adding fees. Across international routes, average fares from the US rose by around 42 percent from pre-war levels. Domestic fares also jumped YOY. Those increases happened fast. The reversals, if they come at all, will happen slowly.
Aviation experts have been consistent on this point. “Even when the hostilities do conclude, it may take many months, and possibly even a year, before jet fuel prices return to more normal levels,” said Henry Harteveldt, president of Atmosphere Research Group. “Even when that happens, don’t expect airlines to lower their fares to pre-war levels.”
Why are the seats still tight?
Part of what is keeping fares elevated is that airlines cut a significant number of flights during the conflict and have not yet restored them. Airlines worldwide pulled back around 9.3 million seats from summer schedules. Several major Middle Eastern carriers whose networks were hit hardest by regional airspace closures also dramatically reduced capacity. Fewer seats with steady demand means airlines simply do not need to discount to fill planes. That equation has not changed yet, even with the peace deal signed.
What this means for your clients
Book now, not later. The most consistent advice from aviation industry experts right now is that waiting for fares to fall is a risk. Summer capacity is limited, demand is strong, and the peace deal has not yet produced the conditions that would force airlines to lower prices. Clients holding out for a fare drop may find there are no seats available when they are ready to book. International routes are feeling the most pressure. Flights through the Middle East are in the process of re-building capacity. Routes across Asia and between Europe and Asia are still seeing elevated fares due to extensive demand. European and Pacific routes particularly anything that historically connected through Dubai, Doha, or Abu Dhabi have far less capacity than before and higher prices as a result.
If fares are going to ease, it is more likely to happen when summer demand drops off and airlines need to work harder to fill seats. Clients with flexible timing who can travel in October or November may find better value than those locked into July and August. Flexible fares are worth the premium right now. Given the uncertainty around how the peace deal will progress, changeable tickets give clients the option to rebook if prices do come down without the risk of losing their seat if they don’t.
The Bottom Line
The peace deal is genuinely good news for the world, and over time it should ease the pressure on fuel costs and ultimately on fares. But airlines spent four months absorbing significant losses, and they are not in a position or a mood to hand back the pricing gains the crisis created. The conditions for lower fares simply have not arrived yet.