BUSINESS NEWS


Airline operating costs are tipped to increase by 8.1% this year


Experts predict airfares will continue to increase


Drop in price of jet fuel offset by host of other cost rises, reports Ian Taylor


Airlines have consistently hailed higher fares in recent results statements, with Ryanair chief Michael O’Leary noting last month: “All our competitors report 20% fare increases.” Fares are higher because of strong


demand and lower capacity than pre-pandemic and will be higher still at times and on routes in most demand. Yet carriers’ underlying costs have also risen, raising the baseline for profitability. Price and wage increases have hit aviation like every other sector,


48 15 JUNE 2023


with Iata forecasting an 8.1% rise in operating costs this year despite a substantial fall in the oil price. Jet fuel cost just under $95 a barrel


last week, 2% up on the week but 46% down year on year and 49% down in Europe – brought lower both by the fall in energy prices from the highs after Russia invaded Ukraine and by a narrowing of the gap between the prices of crude oil and jet fuel which was at a historic high through to March due to pressures on refining capacity. However, jet fuel remains more than 2.5 times the price of 20 years


ago and the world’s biggest oil producer Saudi Arabia is committed to maintaining the oil price at a minimum $80 a barrel to finance the enormous development projects under way in the country. Iata estimates fuel will account for 28% of airline costs this year, down from 30% in 2022 but still four percentage points higher than in 2019. It noted “industry profitability is fragile” last week, highlighting


Continued on page 46 travelweekly.co.uk


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