The cost of plane tickets may jump as much as 9% as oil prices soar in the aftermath of the Middle East war, according to the leading aviation industry group.
“You’re looking at probably an 8% or 9% increase” in airfares, Willie Walsh, director general of the International Air Transport Association, said while attending a conference in Lima. “It’s inevitable that if oil prices remain high, then you will see higher ticket prices.”
Brent, the global oil benchmark, surged above $101 a barrel Thursday as two tankers were hit in Iraqi waters, the latest in a string of attacks on ships in the Persian Gulf. Fuel costs account for about a quarter of the expenses paid by carriers, Walsh said.
“The issue for airlines has always been the volatility, the pace at which the oil price changes,” Walsh said. “So if you have a very rapid increase, it’s difficult for airlines to immediately recover that additional cost.”
Carriers across Europe and Asia are raising fares and fuel surcharges to recoup some of their extra outlays. Some airlines hedge their fuel costs, giving them a buffer, while others do not.
Most of Europe’s major airlines have hedging of between 65% and 80% in place that would take them out at least 12 months, Walsh said.
“For the big European carriers, it’s not a major issue,” he said. “In the short term, the US carriers don’t tend to hedge”…
