Air fares may rise on rising fuel costs

Air fares
1 min read

It is nothing new.When fuel prices increase, the cost of air travel is most likely to increase.

According to data from the International Air Transport Association (IATA), the price of jet fuel has risen nearly 55% over last year, and it doesn’t show any sign of slowing.

At the end of May, IATA Chief Executive Alexandre de Juniac confirmed that profits in the airline industry are unlikely to reach the record levels forecast in December due to a jump in fuel costs adding that his organisation will issue fresh forecasts next week, and that airline profits were still likely to be robust.

Addressing the Australian Aviation Press Club in Sydney, de Juniac said that the aviation industry had seen fuel prices rising for almost 15 months and the price of Brent Crude was now approaching $US80 per barrel compared to IATA’s expectations of $US60 a barrel.

“In the past, such a rapid rise in a key input cost might have plunged the industry back into losses,’’ he said.The airline chief said he was unable to forecast fuel prices and the signs were moving in two directions.

This included more oil coming from the US as well as Saudi Arabia and Russia but also political uncertainty in some parts of the world, including the Gulf region.

Asked about fuel surcharges, de Juniac said that was something IATA did not control and the size of fuel surcharges was directly linked to competition, adding that it was difficult for airlines to impose a fuel surcharge when there was strong competition.

But he noted that if airlines were to survive a significant fuel increase, they needed to pass part of it on to passengers and fares.