Low-cost airline easyJet said the fall in oil prices could knock as much as £2 off its average fare this year.
The airline, which flies from Leeds Bradford airport, estimates that the slump in oil prices by more than a half since last summer will take between £90m and £130m off its annual fuel bill.
A spokesman said this saving would be passed on to passengers, taking up to £2 off last year’s total revenue per passenger of £62.64.
Brent crude oil prices have tumbled nearly 60 per cent since last June to below $50 (£33) per barrel.
EasyJet said that the oil price slump and the subsequent fall in fuel bills will benefit customers as fares fall.
In a trading update, the group said that first-half seasonal losses will fall this year following the introduction of extra seats on successful routes and growth in business passenger revenue.
EasyJet, which is Europe’s second biggest budget airline by passenger numbers after Ryanair, said it expects first-half losses of between £10m and £30m, an improvement on the £53m loss last year.
Chief executive Carolyn McCall said: “We further strengthened our network in the quarter adding around 500,000 seats, the majority of which are from airports where easyJet has a number one or number two position.
“This, combined with our new TV ads aimed at business travellers, enabled easyJet to sell record numbers of seats to business travellers in the first quarter.”
Nicolas Ziegelasch, head of equity research at Killik & Co, said: “Operating performance was strong, with seats up 2.9 per cent, passengers carried rose 4.1 per cent, and the load factor was up 1.0 percentage point to 89.7 per cent.
“Cost per seat excluding fuel in the quarter was down 0.2 per cent on a reported basis and up 3.7 per cent on a constant currency basis. Including fuel, cost per seat decreased by 2.0 per cent on a reported basis.”
The firm, which like other airlines and holiday companies tends to make a loss over the winter season when fewer customers fly, boosted quarterly revenues by £34m to £931m.
The airline said passenger numbers rose by 4.1 per cent to 14.9 million during the three months to December 31.
In November, the carrier said annual pre-tax profits rose 21.5 per cent to £581m, its fourth year in a row of record pre-tax profits, as it said it was winning the battle for the skies with both national flag carrier and budget rivals.
“EasyJet has made a good start to the year by continuing to deliver its strategy of making travel easy and affordable for passengers,” said Ms McCall.
“We enjoyed a strong October across the network – particularly on UK leisure flights to beach destinations and on French domestic routes where we continued to build passenger numbers after a busy September.”
The carrier, which flew 65 million passengers last year, said it expects to grow capacity, measured in seats flown, by around 3.5 per cent in the first half of the year.