Dubai: Airlines in the UAE are not going for another immediate hike in fuel surcharges added to ticket prices even with oil prices hitting the $120 a barrel mark.
Emirates airline currently has a fuel surcharge of Dh250 on Dubai-Delhi flights, while Etihad Airways is charging more than Dh180 on flights to the Indian capital from Abu Dhabi, according to Google’s flight search tool ITA Matrix.
An Emirates airline spokesperson said there had been no increases to the airline’s current fuel surcharges in June, while flydubai, which operates out of Dubai’s Al Maktoum airport, is keeping a close eye on changes. “We constantly monitor fares, and these can go up or down depending on many external factors, including the price of fuel, currency fluctuations or market forces,” said a flydubai spokesperson. “Fuel is our single biggest cost, and we are not immune to price fluctuations but do take every step we can to keep our fares as low as possible.”
On long-haul flights like Dubai-London, Emirates is levying around Dh340, which is nearly half of what British Airways is charging (Dh620). To fly from Dubai to New York, Emirates’ passengers must shell out Dh580 in the form of surcharges on a total fare of Dh3,200 for Economy. US-based low-cost carrier JetBlue is not imposing any fuel-related charges to New York but has a bunch of other charges, which is taking ticket rates to Dh3,400 and over.
A fuel surcharge is the extra fee levied by some airlines in addition to the base fare. The fee, which is decided by each airline, changes with the routes and is often used by carriers to cushion against oil price surges. Jet fuel, the single biggest source of expense for airlines, increases in “real-time” when crude prices go up, said Mark Martin, CEO of Martin Consulting. “Surcharges will not help airlines completely get rid of the risk, but it helps in keeping the flights profitable.”
High fuel prices
Amidst the Russia-Ukraine conflict and overall market uncertainty, aviation fuel prices will continue to trade higher. “Consumers would likely have to shell out more to travel as airlines try to recover some of the input cost,” said Abhishek Kumar, senior oil analyst at Refinitiv.
Kumar said that the ‘significantly’ higher costs could force consumers to cut discretionary spending, which will put pressure on the demand for travel. Jet fuel price has been rising since December last and, currently, the price of jet fuel at the Singapore hub is at $166 a barrel, which is more than twice that during the same period in 2021.
As of May 27, jet fuel prices in the Middle East and Africa region stood at $151 per barrel, compared to $160 in North America and $163 in Europe. It’s not just oil that is contributing to rising prices. When economies began easing Covid restrictions earlier this year, refineries began producing more diesel at the cost of jet fuel production even as airline capacity went up.
Airline capacity is showing strength on a global basis and as China eases the restrictions after two months of stringent lockdowns, demand for jet fuel is expected to see a further uptick combined with the onset of peak summer demand
Impact on Middle East
Gulf airlines, despite being based in some of the world’s biggest oil producing countries, will still be hit by the spike in fuel prices. “The fuel prices in Saudi Arabia and Kuwait are higher than average and that applies to the local carriers – you don’t have two different prices,” said Kamil Al-Awadhi, IATA's Vice-President for Africa and Middle East, in an interview with Gulf News earlier.
“They are paying the same price as everybody else, there’s no advantage to being a GCC carrier.”