More airlines hike flight prices as Iran war continues to disrupt oil supply | Transport
Cathay Pacific, AirAsia and Thai Airways are among a growing number of airlines that are increasing airfares as conflicts in the Middle East drive up oil prices and cause travelers to flock to alternative accommodation in Asia.
The US and Israel’s war against Iran has caused oil prices to rise while restricting access to refineries; Experts predict that even if the conflict ends, flight tickets may increase for months.
Some airlines have fixed the price of some of their crude oil purchases but not the costs of converting it into jet fuel, leaving them exposed to price shocks.
Cathay Pacific CEO Ronald Lam told investors on Wednesday that the refinery plans to increase fuel surcharges for passengers, noting that it has not maintained any of its margins and only 30% of its fuel costs.
“Since jet fuel has nearly doubled [in price]”I think we will make an announcement when the time comes that we will increase fuel surcharges for both travel and cargo,” he said.
AirAsia announced on Thursday it would temporarily increase fares and fuel surcharges, promising to readjust as market conditions change. The airline declined to comment on the reports, which it did not pin on fuel prices.
Thai Airways officials told investors and media outlets they expect airfares to increase by 10% to 15%. Qantas and Air New Zealand announced on Tuesday that they were raising prices, while Air New Zealand added on Thursday that thousands of flights would be canceled from March 16 to May 3, affecting around 44,000 passengers.
Flight cancellations and disruptions in the Middle East also directed international passengers to alternative routes in the short term, increasing prices and causing an increase in demand.
Cathay stood out for selling AU$39,577 for roundtrip business class trips from Sydney to London in mid-April. Economy class fares for the same route are more than A$3,000.
Lam said flights from Australia to Europe and India to the US – on routes typically traveled via the Middle East – had seen particularly significant increases.
Long routes operated by a small number of carriers will see the biggest price increases, especially routes previously served by airlines such as Emirates, Etihad and Qatar, according to Ellis Taylor, an analyst at aviation analytics firm Cirium.
He said prices were likely to rise higher and faster on Australia’s connections to Europe, North America and northern Asia.
Taylor said it was unlikely prices for domestic flights in Australia and flights to nearby southeast Asian destinations such as Bali would rise significantly because they use less jet fuel and are served by more carriers, but “every airline will feel the impact of fuel prices”.
Taylor said bookings made in the next two weeks were likely to be more expensive and the number of flights offered was declining even into July, putting pressure on fares.
Customers hoping to fly in the coming months would be better off booking now to avoid widespread price increases of up to 30 per cent, according to University of Sydney transport professor Rico Merkert.
Even if hostilities ended immediately, it would take about two months for airlines to be confident they could lower their forward booking prices, he said.
“That doesn’t mean they want to make huge profits,” Merkert said. “For some, it’s all about survival.”
For travelers hoping to fly in September or later, it may be better to wait in case the war ends soon, Merkert said.
“I’ll probably wait and see for the next two weeks… if it’s going to be a protracted battle or if they can come to an agreement very quickly.”
Booking site WebJet said Australians were cutting back on long-haul flights, shifting to domestic destinations and other nearby destinations in the Asia-Pacific region.
