Air fares to soar in wake of ash crisis
Monday, 27 Apr, 2010
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Air fares are forecast to rise by more than five per cent this year in the wake of the Icelandic volcanic ash crisis and increasing oil prices.
UK travellers can expect to pay an additional £1.8 billion or £48 each on average, according to figures from the Centre for Economics and Business Research for the website Kelkoo.
The study warns that fares are set to rise by 11.5% by 2012, adding £62 to the cost of an average economy flight from London to New York – from £518 to almost £580.
The rises are predicted as carriers attempt to claw back an estimated £1.3 billion in costs due to the ash cloud disruption by the end of last week.
It is believed that up to two thirds of the costs will be borne by European airlines.
Bruce Fair, managing director of the e-commerce website Kelkoo, said: “Most airlines were already struggling prior to the crisis, but this, combined with soaring oil prices, will have a knock-on effect on consumers as carriers are forced to pass on rising operational costs to passengers.
“Oil prices – the main cost factor for carriers and representing 33% of total operating costs – are up by more than 74% in the first quarter of 2010 compared to Q1 2009.
“Additionally, increasing competition and falling demand mean that airline operators have struggled to remain profitable.
“Profit margins have been under pressure fro some time as established carriers had to adjust their business models following the market entry of low cost airlines in the 1980s.”
He added: “Operating profits turned negative in 2009, with losses reaching 3.4% of revenues and exceeding the slump experienced after September 11.
“In 2010 it is expected that profitability will remain negative, giving the industry little headroom to adjust prices downward.
“Based on the impact of oil prices, economic growth, and inflation on air travel, it is expected that cost pressures and constraint profitability will lead to an average rise in fares of 5.2% across Europe, increasing to 11.5% by 2012.”
by Phil Davies
Phil Davies
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