HOT TOPIC Oil production “We’re building up a big issue. In a
couple of years we’ll probably need to go from 85 million barrels of oil a day to 90 million and we won’t be able to.” He added this could mean oil suddenly peaking at prices of $200 a barrel before finally stabilising at $50 or $60 a barrel in up to six years’ time. Sven Carlson Aviation consulting managing director Carl Denton agrees the recent low cost of fuel is more likely to be temporary than long-term. He argues that with hedged fuel prices being more than today’s fuel prices, the industry is expecting the rise to be soon. Overall, Denton says the move has been positive for the industry despite a stronger dollar, and while airlines with hedged fuel are just beginning to feel the benefits now, he believes they will last into the summer. However, he warns airports that if
they are expecting this to lead to a brave new world of route development, those that aren’t primary airports will be disappointed. He cites the example of Norwegian’s announcement in March that it would introduce three new routes out of Manchester to Barcelona, Alicante and Malaga, routes that were already being served by at least four other airlines, as proof that times have changed. Denton says: “These routes are
incredibly well served which indicates how confident Norwegian is. It believes there’s a big enough market available for it to compete but this is creating massive problems from a capacity point of view. If you look at Gatwick I think it is genuinely full and there’s nothing it can do about it. “It is a risk-averse strategy, it is a
balance between being on a well-served route or being the only one on an unserved route and generating customers. They [the airlines] would rather have a price war with someone and they’re not worried about putting more capacity on a route that is already well served.” Astor added while secondary airports might not see the benefits of reduced fuel
100 120
80 60 40 20
Lower aviation fuel prices aren’t expected to last
prices immediately, they should not give up quite yet, particularly if prices do stay down long term. Denton also argues that they can do
more to help themselves in the current climate by rethinking how they can best attract the airlines. “For secondary airports, I think the old days of commercial incentives are running down,” he says. “Small airports need to be a lot more
creative and look at partnerships with airlines and tourist boards. It is not just about what the airport can do, it is about what the tourist boards can do. If it is a leisure destination they have to be involved with the tourist board in the area but they have to understand what the airline wants.” Denton adds other potential partner
airports can consider including local travel agents and hoteliers as they seek to build a case for a new route on the strength of the entire destination, not just the airport itself. He believes new deals which would see airports share the risk as well as the profits with any airline introducing a new route will also prove commercially successful. In short, while no one quite knows how long the new normal will last, it seems airports can best prepare for the future by focusing on the abnormal. A range of new commercial strategies will keep them ahead of their competitors, wherever they may be. £
“We’re building up a big issue. In a couple of years we’ll probably need to go from 85 million barrels of oil a day to 90 million and we won’t be able to.”
JUNE 2014
JULY 2014
AUG 2014
SEPT 2014
OCT 2014
NOV 2014
FEB 2015
DEC 2014
JAN 2015
MAR 2015
Monthly dollar price of a barrel of Brent Crude
APR 2015
MAY 2015
JUNE 2015
JULY 2015
AUG 2015
SEPT 2015
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NOV 2015
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54 ISSUE 3 ROUTES NEWS 2016
routesonline.com
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