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High Cost Of Fuel Triggers Fare Increases

Airlines up fares to offset high fuel costs

Jun 12, 2011

Dubai - Airlines around the world will have to increase fares by about five per cent to offset the massive 50 per cent surge in fuel prices over the last 12 months, the chief economist of the International Air Transport Association (IATA) said.

"With no sign of a significant decline in oil prices that are staying stubbornly above $100 a barrel, airlines are fighting to stay profitable and have pushed up ticket prices in order to recoup costs. They have had no choice but to hike fares," Brian Pearce said.

"We are looking at a fare increase of at least five per cent. We have seen a five per cent increase in unit costs because of the rise in jet kerosene and that is with the [airline] industry having hedged 50 per cent of this year's fuel bills. So we are going to see that five per cent reflected in airfares," he added.

Airline chiefs echoed the sentiment. "We may have to tend to our costs if oil prices go up to $150-$160 per barrel. And as long as the fuel stays at $100 per barrel plus, the whole industry is going to face real problems," Tim Clark, Emirates airline president, said, adding that the carrier has already increased airfares by 15 per cent this year.

Alan Joyce, chief executive of Qantas, said the industry will witness further price increases this year, The Australian carrier has gone through a number of fare increases and fuel surcharge increases so far this year, he said.

"The increases have still not recovered the additional fuel costs," Joyce added.

Airlines up fares to offset high fuel costs
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