Cheaper air tickets won't fly

Airline passengers are unlikely to see a dip in flight prices. Photo / Richard Robinson

Despite the plummeting cost of crude oil, business commentators say it is unlikely airline passengers will be offered cheaper tickets.

Virgin Australia announced on Thursday it would cut the cost of a round trip between Australia and the United States by between A$40 ($42.66) and A$50, partly because of falling fuel prices.

A spokeswoman said fares across the Tasman were under constant review but there were no plans to cut them on a route that was already highly competitive.

Air New Zealand yesterday declined to say whether the airline would cut its fare prices as a result of lower crude oil prices.

A spokeswoman said the airline was "entering a strong growth phase and will ensure demand continues to be generated with competitive pricing".

"Customers will enjoy the benefit of this with new initiatives over the coming months."

This month, Air New Zealand said it managed its exposure to fuel price fluctuations by locking in prices for future jet fuel purchases ahead of time.

"As a result we are largely unaffected by recent changes in fuel prices," a spokeswoman said.

Fuel makes up to 50 per cent of the fare cost on some routes.

Z Energy said it had dropped its aviation fuel prices as a response to falling crude prices.

The company currently supplies around 30 per cent of New Zealand's 1.3 billion litre jet fuel market and spokeswoman Julie Malcolm said the price of aviation fuel had fallen by approximately 30c since last October.

Airline commentator Peter Clark said many airlines had hedged fuel - pre-purchased at set rates to protect against price fluctuations - and as a result were unable to reap the rewards of cheaper fuel.

"A lot of airlines have hedged out into the future at a set price," Mr Clark said.

"They thought they were doing the right thing to protect fare levels and protect their profitability."

Air New Zealand's latest annual report shows that as of August 15, the airline had hedged 77 per cent of its fuel needs for the first half of the 2015 financial year, but only 50 per cent for the second half.