Business | Aviation
High fuel costs still worry airlines
High oil prices that have upset financial forecasts of the aviation industry continue to remain a headache for airlines in the region.
- By Shakir Husain, Staff Reporter
- Published: 00:13 October 3, 2008
- A JetBlue plane being refuelled. While jet fuel costs have come down, volatility remains a worry for airlines.
- Image Credit:
Dubai: High oil prices that have upset financial forecasts of the aviation industry continue to remain a headache for airlines in the region.
The widening impact of the US financial crisis has only added further volatility to fuel prices.
This means that most airlines would be cautious about lowering ticket prices even if the price of crude falls below $100 per barrel to last year's levels.
"Fluctuating fuel costs are a challenge for all airlines and remain a significant proportion of airlines' total costs. We continue to monitor the situation on a daily basis, with the key priority to ensure Etihad offers competitive pricing to the customer in all markets in which we operate," Iain Burns, vice-president of corporate communications for Etihad Airways, told Gulf News recently.
Climbdown
The price of jet fuel averaged close to $125 per barrel for the week ending September 19, according to the International Air Transport Association (IATA). This was 11 per cent lower than the week before, but about 30 per cent higher compared with the price a year ago.
Crude oil prices have fallen from the historic high of $147 reached in mid-July as slowing global economic growth could lessen demand for oil.
In recent weeks, crude prices have fallen below $100, but the declines were short-lived. The industry has nonetheless welcomed the easing of oil prices.
"Now that the oil price has reversed, we want to see two things: stability of the price and sustainability of this price over a period of time," said Adel Ali, chief executive officer of Sharjah-based budget carrier Air Arabia.
The sentiment was echoed by Merina Abu Tahir, Dubai-based regional general manager of Malaysia Airlines, when asked if the airline will review its fares in view of the recent oil price declines.
"Any decision on ticket price and fuel surcharge will be based on the movement of the fuel price over a period of time rather than what could possibly be just a short term decrease in fuel price," she said.
In a relief for Eid holiday travellers, several airlines flying between the UAE and international destinations offered promotional fares.
"Despite high jet fuel costs, we continue to offer promotional fares and packages during selected travel periods," Merina said.
Emirates revised its fares in August for tickets issued in Middle East and Gulf markets to over 20 cities, reflecting the recent softening of fuel prices.
However, a statement at the time noted that the price of fuel was still substantially higher than the average price per barrel in 2007.
An airline office told Gulf News a few days ago that "this year is going to be a lot tougher than last year" and profits will be affected because of the "the uncontrollable impact of oil prices".
The spreading US financial crisis has brought a new set of problems for the airline industry.
Outlook
"While the drop in oil price is welcome relief on the cost side, fuel remains 30 per cent higher than a year ago. And with traffic growth continuing to decline, the industry is still heading for a $5.2 billion [Dh19.12 billion] loss this year," Giovanni Bisignani, IATA's director general and chief executive officer, said in a statement on Tuesday.
IATA has said the industry crisis is deepening and no region is immune from it. And airlines remain averse to make any predictions about their performance for the year.
"It is still too early to conclude that the oil price will stabilise at the current level for the rest of 2008. Whilst the oil price is not something that we can control, we are continuing to manage our fuel costs. There are also concerns on global economics slowdown and financial crisis, particularly in the US," Merina of Malaysia Airlines said.
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