Air fares about to rocket
An article in the Herald Sun by Geoff Easdown says that airline passengers can soon expect to pay the penalty of higher ticket prices as the price of jet kerosene continues to hover above $US100 a barrel.
Last week’s late surge in the Singapore oil market pushed the jet fuel price to a new high of $US103.35 on Friday, all but guaranteeing a hike in both Qantas and Virgin Blue’s ticket surcharge.
Both carriers already had signalled that ticket charges were likely to rise in the months to come, even before the latest fuel price surge.
During the past two weeks Peter Gregg, chief financial officer of Qantas, and Virgin Blue chief executive Brett Godfrey have each warned that a situation will arise when rising fuel costs cannot be absorbed.
Qantas is 100 per cent hedge protected against increases until Christmas and 78 per cent covered going into the New Year, but the problem for both airlines and passengers is that bookings are now being taken and fares paid for travel in 2008.
As Mr Gregg noted 12 days ago when jet kerosene cost the airlines $US95 a barrel: “We have a little bit of (hedging) protection through to Christmas, but if oil stays at the present level beyond that then we’ll have to reconsider our surcharges.”
Jetstar has not disclosed what steps it has made to offset rocketing prices.
Last Wednesday Brett Godfrey, Virgin Blue’s chief executive, followed up Mr Gregg’s comments, warning shareholders at the airline’s general meeting the company might have to raise its fares surcharge some time during the next year.
Mr Godfrey said that jet fuel was now at prices no one expected to see “. . .and something’s got to give,” he said.
Until recently a booming Australian dollar has helped cushion the effects of fuel price rises, because aviation fuel is costed in their accounts in US dollars.
Singapore refined jet kerosene, the price benchmark used by both carriers, has increased by more than $US20 a barrel since the beginning of August.
On Thursday jet fuel prices in Singapore moved beyond the $US100 mark for the first time this decade.
But neither the airlines nor business analysts expect the fuel prices to impact passenger growth.
Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation in Sydney, said airlines have been consistently pushing surcharges up to match their own rising costs.
“More importantly the punter seems to be accepting it,” Mr Harbison said, adding he was surprised bookings were not impacted earlier.
“The impact, if it was going to happen, should have been more on the general economy,” said Mr Harbison, noting that air traffic costs were only a small part of everyone’s general expenses.
“The numbers clearly show that the world wants to fly, and it needs to fly,” said IATA’s director general Giovanni Bisignani, noting that global aviation activity accounts for $US3.5 trillion in annual economic activity and that 32 million people worked in the global airline business and aviation related industries.
A Report by The Mole, from The Sun Herald
John Alwyn-Jones
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