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United Airlines and Continental Airlines raise fares on Tuesday in view of the rising fuel prices. American and Delta Airlines follow suit. Qantas, Australia’s national carrier also announces hike of fares due to high jet fuel prices.
The rising cost of fuel is forcing numerous airlines to increase their fares. This trend is slowly turning into a major disappointing factor for travellers looking to book cheap flights. In fact, the rising fuel costs even have the potential to nip into the profit margins of different airlines.
Airlines in the US raise Ticket Prices
United Airlines and Continental Airlines hiked ticket prices, which started a chain reaction with American and Delta Air Lines following suit. Further airlines are also expected to hike their fares. The price hike has been to the tune of $20 to $60 on round trip tickets and is targeted towards travellers making last-minute bookings in the business travel segment. The hike in price is also in tandem with the improvement in the business travel segment over the last few months and there are projections of further growth. With fuel prices going north, airlines are trying to share their burden. In fact, since mid December, leisure fares have been increased four times. According to the Associated Press, passengers buying ‘first class and instant-upgrade tickets’ will be impacted by this fair hike. The Associated Press further reported that these travellers ‘are less likely to put off or cancel trips because of rising prices’.
What Experts Say
According to market experts, airlines face a difficulty as they fail to raise prices for travellers making advance flight bookings. As a result, when oil prices rise, they try to remedy the situation. Passengers who make late bookings help in offsetting the potential losses incurred due to early bookers. With the economy gaining strength and continuous rise in oil prices, air travellers should be prepared for an upward spiral in the price of air tickets.
Who Gets Hit the Hardest?
The fair hike by United and Continental has been matched by Delta Air Lines. As a result, passengers from the Twin Cities of Minneapolis and St Paul, who catch flights with Delta Air Lines, will be the hardest hit at the local level. Everyday, Delta Air Lines handles over 450 departures from the Twin Cities and remains the town’s largest airline. There was no immediate reaction from budget carriers such as Sun Country, Frontier, AirTran, and Southwest to the hike by Delta Airlines. Similarly, Alaska Airlines and US Airways also did not respond to the hike. These two airlines also serve the Minneapolis St Paul Airport.
Qantas too Announces Price Hike
Qantas announced plans to increase the airfares of domestic, regional and trans-Tasman flights by up to 5%, as the next step to tackle rising prices of oil and jet fuel. According to the airline, the main reasons behind this decision are the rising average prices in Singapore Jet Fuel (SJF) and West Texas Intermediate Crude Oil (WTICO). According to Qantas, the prices in SJF and WTICO are at their peak since FY2008 and also higher than the prices during the first half of FY2011. The average per barrel hike of SJF has been US$88 from September, 2010 to US$110 in January 2011, and reached US$117 in the current week. From February 25th onwards, tickets will be sold according to the new price.
Qantas CEO’s Comments
According to the CEO, Alan Joyce, ‘Airlines in Australia and around the world continue to monitor oil and fuel prices very closely, and many have already responded to the current high prices with changes to their surcharges and fares’. He further said ‘Domestic, regional and Tasman fares have been under review and, while we have been absorbing higher fuel costs for some time, this increase is an appropriate response to this significant and additional cost to our business’. Joyce even warned that further fare hikes cannot be ruled out and that ‘after fuel hedging and this change to our fares, Qantas will still not fully recover these higher fuel costs’.