Airlines often enter into forward supply contracts for fuel to hedge against spikes in fuel costs, so the price of the fuel for a flight today may have been set

Airlines often enter into forward supply contracts for fuel to hedge against spikes in fuel costs, so the price of the fuel for a flight today may have been set a year or more ago ago. However, even if the airline benefits from a drop in the price of fuel, it doesn't necessarily mean cheaper flights. Airlines don't operate on a "cost plus" basis - they set their prices based on the competitive environment. If the price rises, the airline gets to keep the extra profit[1]; if it drops, the airline's profits suffer[2]. Hopefully, the current low oil price will let the airlines lock in lower fuel prices for the next couple of years and competitive pressures will start to result in lower ticket prices next year.[3] 1: http://www.economist.com/blogs/gulliver/2015/01/fuel-hedging-and-airlines http://www.economist.com/blogs/gulliver/2015/01/fuel-hedging... 2: http://www.standard.co.uk/business/ryanair-boss-keeps-losing-by-hedging-his-bets-on-oil-price-6916104.html http://www.standard.co.uk/business/ryanair-boss-keeps-losing... 3: http://uk.reuters.com/article/uk-airlines-fuel-hedging-idUKKCN0RM0FD20150922 http://uk.reuters.com/article/uk-airlines-fuel-hedging-idUKK...