Experts say the war in Iran is driving up the cost of jet fuel, which will drive up the cost of flying.
“I think what you’re seeing happening now is 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.
Gradek said that the price of jet fuel is up about 30 per cent and the cost of fuel represents about 30 per cent of an airline’s operating costs.
“The airline’s margins that you typically have is about a three or four per cent margin on their sales,” he said. “So right now, with the cost of the fuel as we see it, they’re losing money on every flight. So what’s happening is that the airlines are trying, are scrambling to figure out how much of a fuel surcharge to put in.”
Gradek said Air Transat has already started 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 recognize that jet fuel is more expensive and fares are going up,” he said.
Gradek said that other airlines are trying to figure out what to do to keep costs manageable, but also profitable.
He said that WestJet made a statement on Wednesday that there is 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 price of oil?” he said.
“And the price of oil is bouncing all over the place. So it is a moving target for them to, in fact, set a fuel surcharge on. But the longer they wait, the more money they lose. So they’ve really got to come to grips with this pretty 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 basically 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 big, big part of an airline. So let me just give you a quick example here. A Boeing 777, just to take off, burns 2,200 litres of fuel. So if you’re looking at that, that’s $2,800, almost $2 900, just to take off and fuel alone. So that’s a big part.”
Smith said airlines are trying to keep their prices down, but travellers can expect to see a fuel surcharge on their bill.
“If you don’t see it in the price, you’ll see it in the surcharge afterwards,” he added.
Ashley Harold, a travel consultant with the Flight Centre Travel Group, told Global News that travellers will see a wide range of prices, depending on the destination, timing and competition on a route.
“At the moment, we’re seeing Canadians having more of a focus on the travel plans themselves and where their dollar can be stretched further,” she said.
“That’s what we’re seeing. And for folks that have a particular budget that they’re hoping to stay within, we encourage them to seek out an expert, such as 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 choose to fly within Canada and North America now, but the future is uncertain.
“The surcharges they’re looking for in Canadian traffic is probably somewhere between $50 and $100 one way as a surcharge,” he said.
“Once I get to Europe, probably $100 to $200 one way. And by the time I get to Asia, it’s probably around $300 to $400 one way, so that’s a typical distribution of how these fuel surcharges have been dealt with in the past. So I don’t expect any different actions coming up on this one.”
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