Experts say the war in Iran is driving up the fee of jet fuel, which can drive up the fee of flying.
“I feel what you’re seeing happening now could be a volatility in jet fuel that hasn’t been seen in years,” John Gradek, a former Air Canada executive and McGill University faculty lecturer in aviation management, told Global News.
“I feel that the volatility starts with the value of oil, where it was as much as 110 [a barrel] last week, or earlier this week, right down to 89 yesterday and as much as 98 again today. So it’s bouncing up and down. The impact of that on jet fuel is critical.”
Gradek said that the value of jet fuel is up about 30 per cent and the fee of fuel represents about 30 per cent of an airline’s operating costs.
“The airline’s margins that you usually have is a few three or 4 per cent margin on their sales,” he said. “So without delay, with the fee of the fuel as we see it, they’re losing money on every flight. So what’s happening is that the airlines are attempting, are scrambling to work out how much of a fuel surcharge to place in.”
Gradek said Air Transat has already began adding a fuel surcharge to tickets and British Airways and Qantas are introducing some on Thursday.
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“The world is starting to acknowledge that jet fuel is costlier and fares are going up,” he said.
Gradek said that other airlines are attempting to work out what to do to maintain costs manageable, but additionally profitable.
He said that WestJet made an announcement on Wednesday that there’s a significant cost increase in fuel, while Air Canada and Porter are contemplating what to do.
“At what level do you set your surcharge based on the value of oil?” he said.
“And the value of oil is bouncing everywhere. So it’s a moving goal for them to, the truth is, set a fuel surcharge on. However the longer they wait, the extra money they lose. So that they’ve really got to come back to grips with this gorgeous quickly.”
Wayne Smith, a professor and director of the Institute for Hospitality and Tourism Research, said fuel surcharges are inevitable at this point.
“We’ve seen the fuel price mainly go from the equivalent of about 76 cents a litre to over $1.30 a litre for them just from December till now,” he said.
“People don’t realize that fuel is a giant, big a part of an airline. So let me just offer you a fast example here. A Boeing 777, simply to take off, burns 2,200 litres of fuel. So if you happen to’re that, that’s $2,800, almost $2 900, simply to take off and fuel alone. In order that’s a giant part.”
Smith said airlines are attempting to maintain their prices down, but travellers can expect to see a fuel surcharge on their bill.
“Should you don’t see it in the value, you’ll see it within the surcharge afterwards,” he added.
Ashley Harold, a travel consultant with the Flight Centre Travel Group, told Global News that travellers will see a big selection of costs, depending on the destination, timing and competition on a route.
“For the time being, we’re seeing Canadians having more of a concentrate on the travel plans themselves and where their dollar will be stretched further,” she said.
“That’s what we’re seeing. And for people which have a specific budget that they’re hoping to remain inside, we encourage them to hunt down an authority, resembling a travel agent, to see where their budget can get them further, where the Canadian dollar stretches further.”
Gradek said that he thinks people will decide to fly inside Canada and North America now, but the long run is uncertain.
“The surcharges they’re searching for in Canadian traffic might be somewhere between $50 and $100 a method as a surcharge,” he said.
“Once I get to Europe, probably $100 to $200 a method. And by the point I get to Asia, it’s probably around $300 to $400 a method, in order that’s a typical distribution of how these fuel surcharges have been handled up to now. So I don’t expect any different actions coming up on this one.”
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