Will US airlines pocket fuel savings instead of cutting fares?

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US airlines are likely to keep much of the fuel savings rather than cut fares quickly.

US jet fuel prices fell to US$2.85 a gallon on June 17 from an early April high of US$4.88, a drop that could reduce the industry’s annual fuel bill by more than US$40 billion if it lasts. Even so, fares have lagged fuel costs all year, and limited seat growth gives airlines room to use cheaper fuel to rebuild margins instead of reversing recent price increases.
Airlines have only partly passed higher fuel costs on to passengers

From January to May, jet fuel prices rose more than three times faster than airfares. Deutsche Bank estimated US carriers recovered only about 60 cents for every extra dollar spent on fuel, while Alaska Air said it was recovering about one-third of the increase and Delta Air Lines, United Airlines and American Airlines put second-quarter recapture at 40% to 50%.
Ticket prices are still elevated

Average domestic fares booked one week before travel were up 34.1% year on year as of June 8. United chief executive Scott Kirby said the airline was “on a path to recovering 100% by the end of the year,” which points to pricing staying firm rather than being rolled back quickly.
Tight capacity limits the chance of a broad fare war

US domestic airline seats are scheduled to grow only 0.4% year on year in the third quarter, far below the 4.6% growth expected before the latest Middle East tensions. Aircraft delivery delays, tight airport capacity and weaker low-cost carriers are also reducing the risk of a broad domestic fare war, allowing airlines to hold current pricing.
Lower fuel costs may help margins before passengers see relief

Fuel bills reflect purchases over time, and jet fuel is still 54% more expensive than a year ago. Southwest Airlines chief operating officer Andrew Watterson linked a return to pre-pandemic margins to lower fuel costs, showing how airlines may prefer to keep the savings as earnings support rather than use them to cut fares.

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Will US airlines pocket fuel savings instead of cutting fares?

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