High fuel prices could spell end of cheap flights

Dubai: Record-high fuel prices could spell the end of cheap flights and challenge the growth of the travel industry, an travel company said yesterday.

Rolf Schafroth, Kuoni Group's head of strategic business division destinations, said people are now holding back spending on travel as flights and holiday packages have become more expensive in the face of rising fuel costs and the depreciating US dollar.

"The price of flying has gone up as oil prices soar. How this trend is developing should then be monitored closely," Schafroth told Gulf News.

He said the soaring cost of oil allied to global econ-omic uncertainty is having a painful impact on the travel business and has made travelling to certain destinations like Europe and India more costly.

The International Air Transport Association (IATA) earlier called on governments, industry partners and labour to address the fuel crisis that's pushing airlines into the red.

IATA had forecast a loss of $2.3 billion for 2008 based on an average oil price of $106.5 per barrel Brent crude. However, with an oil price at $135 per barrel for the rest of the year, the association warned that this year's loss could potentially hit $6.1 billion.

Analysts have declared that the era of cheap flights is over as oil prices are pushing fares up. They said the combination of costly fuel and decline in passenger size due to expensive flights and low consumer confidence could also lead some airlines to bankruptcy.

Yet, while the fuel crisis is threatening the global travel business, the Swiss travel company announced yesterday its plan to buy an 80 per cent stake in Dubai-based Desert Adventures Tourism together with a local partner.

Rosy outlook

Schafroth said the future of Dubai's tourism industry is still rosy, as they're seeing a continued stream of tourists drawn by the city's infrastructure boom, leisure facilities, theme parks and shopping opportunities.

He said Dubai is the most viable place to expand business, as the city's strategic location will give them easier access to other target markets in the GCC and build up their position in the region.

Founded in 1997 in Dubai, Desert Adventures is active in destination management in the UAE, Oman, Qatar and Bahrain. It expects to post sales of about 100 million francs for 2007-08 financial year that ends this month.

Despite the acquisition, the company will retain its 150 staff, while the existing management team will continue to have responsibility for the company's development. The remaining 20 percent stake in the company will be retained by the current managing director.