Airlines Raise Fares and Cut Forecasts as Fuel Costs Rise
Major airlines such as United and Air France-KLM are raising ticket prices as jet fuel hits $200 per barrel. Many carriers are also cutting flights and revising forecasts.
The global aviation industry is grappling with a sharp rise in jet fuel prices, a direct consequence of the conflict involving the United States, Israel, and Iran. Costs have surged from a range of $85 to $90 per barrel to between $150 and $200 per barrel in recent weeks. This spike is particularly damaging for an industry where fuel accounts for up to 25% of operating expenses, forcing carriers to raise ticket prices and adjust their financial forecasts. European carriers are among the most affected. AEGEAN AIRLINES of Greece expects a notable impact on its first-quarter results due to higher fuel costs and suspended Middle East routes. AIR FRANCE-KLM has announced plans to increase long-haul ticket prices by 50 euros per round trip. easyJet plc, based in the United Kingdom, warns that consumers should expect higher fares as summer approaches. > "European consumers should expect higher ticket prices towards the end of summer, when existing fuel hedges come to an end." Other regional developments include SAS cancelling 1,000 flights in April and SunExpress—a venture between Turkey-based Turkish Airlines and Lufthansa—imposing a temporary fuel surcharge starting in May. British Airways owner IAG has avoided immediate price hikes due to its short-term fuel hedging strategy. In Asia, CATHAY PACIFIC AIRWAYS of Hong Kong is raising fuel surcharges for the second time in two weeks. Hong Kong Airlines is also increasing fees for routes to the Maldives, Bangladesh, and Nepal. Greater Bay Airlines will double its surcharge for the Philippines, while keeping rates steady for China and Japan. Within the Philippines, Cebu Air and Philippine Airlines are reviewing their strategies, with the latter warning of potential fuel rationing. In India, IndiGo and Akasa Air have introduced surcharges on domestic and international routes. Carriers in Thailand and Pakistan are also hiking fares, while Vietnam carriers such as VietJet and Vietnam Airlines are adjusting flight frequencies or seeking government tax relief. Oceania and North America are seeing similar trends. AIR NEW ZEALAND LTD was one of the first in New Zealand to announce broad fare hikes and has suspended its earnings forecast. VIRGIN AUSTRALIA HOLDINGS LT is adjusting fares to reflect cost pressures, while Qantas Airways in Australia is monitoring fuel security and demand. In the United States, American Airlines Group Inc. expects a $400 million increase in first-quarter expenses. United Airlines Holdings, Inc. is cutting unprofitable flights as it prepares for oil prices to remain above $100 through 2027. > "United has been able to raise fares without materially hurting bookings in response to the rapid increase in oil and jet fuel prices." Frontier Airlines is also reviewing its full-year forecast as fuel prices have increased significantly since its last outlook.
