\n<\/p>\n
Experts say it\u2019s not a question of if airfares will go up, but when, for how long and by how much. The impact may be felt most on long-haul international routes, which burn significantly more fuel than shorter flights.<\/p>\n
\nSome airlines outside of the UShave announced fare increases or fuel surcharges in an effort to offset the growing expense. In the US, United Airlines CEO Scott Kirby recently warned that airfare increases will \u201cprobably start quick\u201d as increasing fuel costs work their way through the industry.
The war is constraining oil exports and prompting major producers like Kuwait, Saudi Arabia and Iraq to scale back output as shipments face growing obstacles.<\/p>\n
Iran has attacked commercial ships across the Persian Gulf and targeted oil infrastructure in Gulf Arab nations following US and Israeli strikes. The attacks have effectively halted traffic through the Strait of Hormuz, a narrow passage that carries about one-fifth of the world\u2019s oil supply.<\/p>\n
The volatile crude oil prices causing retail gasoline prices to swing up sharply have had the same effect on the price of jet fuel. The average price in the US reached $3.99 per gallon on Friday (March 13), up from $2.50 the day before the war started two weeks ago, according to the Argus US Jet Fuel Index. The index tracks the average price airlines pay for jet fuel across major US airports.<\/p>\n
Figures from the US Department of Transportation\u2019s Bureau of Transportation Statistics show that US airlines paid about $2.36 per gallon for fuel in January, the most recent data available.<\/p>\n
Some airlines are partially protected from sudden price spikes through fuel hedging, a strategy that allows them to lock in fuel prices months or even years in advance. But not all airlines hedge, and those that do are usually only protected for a portion of their fuel needs, meaning prolonged price surges may cause more carriers to raise fares.<\/p>\n
\u201cNo one hedges anymore, and even if you do, hedging the crack spread is really hard to do,\u201d Kirby said at a Harvard event last week. The crack spread is the difference between the price of crude oil and the price of products produced from it, like gasoline.<\/p>\n
Another factor for airlines: Air space closures have required rerouting flights around parts of the Middle East, which can mean longer routes, additional fuel burn and higher operating costs.<\/p>\n
Travellers may feel the impact in several ways.<\/p>\n
Airlines can add or increase fuel surcharges, an extra fee common among carriers outside of the US that\u2019s added on top of the base ticket price.<\/p>\n
Major US carriers, however, don\u2019t charge a separate fuel surcharge. Instead, they build fuel costs into the overall ticket price, meaning any increase is more likely to show up as a higher base fare for travelers, according to Tyler Hosford, security director at global risk management firm International SOS.<\/p>\n
Airlines also may adjust what they charge for premium add-ons \u2014 such as seat upgrades, extra legroom seats, checked bags or priority boarding \u2014 as another way to offset higher operating costs. For consumers, that means even if the base fare doesn\u2019t rise immediately, the total cost of a trip could still increase once additional fees and upgrades are factored in.<\/p>\n
\nIf higher fuel prices persist, airlines may also adjust schedules or reduce certain routes, said Christopher Anderson, a professor at Cornell University\u2019s business school whose research includes operations and information management in the hospitality and airline industries.<\/p>\n
It\u2019s difficult to predict exactly how much ticket prices could increase as a result of costlier oil and fuel. Industry analysts say the impact of higher jet fuel costs can vary based on the route, airline and travel demand.<\/p>\n
Fuel typically accounts for 20% to 25% of an airline\u2019s operating costs, making it the second-largest expense after labor, according to Rob Britton, an adjunct marketing professor at Georgetown University and retired American Airlines executive. A sharp rise in fuel prices therefore can have a major impact on airlines\u2019 budgets.<\/p>\n
So far, most fare increases and fuel surcharges are coming from airlines based in the Asia-Pacific region, but experts expect more airlines \u2014 especially those without fuel hedging \u2014 to follow if high jet fuel prices persist.<\/p>\n
Hong Kong\u2019s flag carrier, Cathay Pacific, said it would increase its fuel surcharge starting Wednesday.<\/p>\n
\u201cThe price of jet fuel has approximately doubled since March amid the latest developments in the Middle East,\u201d the airline said in a statement Thursday.<\/p>\n
Other airlines with price increases or new surcharges include:<\/p>\n
\u2014 Air France-KLM said roundtrip economy fares on long-haul flights could rise by about 50 euros (about $57).<\/p>\n
\u2014 Air India introduced fuel surcharges Thursday on certain routes. After March 18, the carrier says the surcharge will increase by up to $50 for all tickets to Europe, North America and Australia.<\/p>\n
\u2014 Hong Kong Airlines increased fuel surcharges across several routes as of Thursday.<\/p>\n
\u2014 FlySafair in South Africa announced a temporary fuel surcharge<\/p>\n
Experts say travelers planning summer trips may be able to limit the impact of rising airfares by booking earlier rather than waiting for last-minute deals.<\/p>\n
Locking in ticket prices sooner \u2014 especially with flexible booking options that allow changes \u2014 can help secure lower prices before airlines adjust rates further.<\/p>\n
Hosford, the security director at International SOS, suggests travelers stay flexible with travel dates, check fares at nearby airports and set alerts for price drops. He also recommends using frequent flyer miles or credit card points to book flights instead of holding out for a \u201cperfect deal.\u201d<\/p>\n
\u201cIf you were going to spend cash on the flight but now you\u2019re not, then that\u2019s a good redemption deal,\u201d he said.<\/p>\n<\/div>\n