Rising fuel costs could mean pricier airfares
BNN Bloomberg
Just when there was hope on the pandemic horizon, airlines now face a second headwind of skyrocketing oil prices — which could make airfares even more expensive.
Just when there was hope on the pandemic horizon, airlines now face a second headwind of skyrocketing oil prices — which could make airfares even more expensive.
Fallout from Russia's invasion of Ukraine, including sanctions and oil import bans, helped push up the price of jet fuel by more than 27 per cent to US$142 a barrel in the week ending March 4, according to S&P Global Commodity Insights.
"If the jet fuel price stays that high, then over time it is reasonable to expect that it will be reflected in airline yields,” said International Air Transport Association director general Willie Walsh in a release Thursday.
Concerns over fuel, which is airlines' biggest expense after labour, may prompt carriers to recoup that cost with pricier tickets.
Demand for travel among Canadians is rising after two years cooped up under COVID-19 restrictions, but the bigger booking numbers could plateau if ballooning fuel costs are passed on to passengers through higher fares, said John Gradek, head of McGill University's aviation management program.
"You're seeing a situation where carriers have to take some action — either to hedge their fuel prices, or pass on some of those increases to the customer, or absorb those increases internally," he said.
