Airline Passengers Face Higher Fares as Fuel Surge Hits Major Carriers
Rising fuel costs are starting to make a big impact on flight bookings at Canada’s major airlines, with experts seeing no immediate end in sight.
The latest will arrive on Wednesday, with WestJet announcing a temporary fuel surcharge of $60 on “all bookings made with a companion voucher.”
There have been recent price increases on certain bookings at Air Canada, Porter, Air Transat, and Flare, with additional charges ranging between $40 and $100.
Lorn Sheehan, a professor with the faculty of management at Dalhousie University in Halifax, is an expert on the travel industry, and says airlines don’t have many avenues to recover from fuel price increases – its single largest variable cost.
“I think (airlines) are trying to be as sensitive as they can, knowing that consumers are incredibly price sensitive when it comes to the cost of airline travel,” says Sheehan. “When prices go up, discretionary travel, vacations, and pleasure travel tends to fall.”
Sheehan says ongoing uncertainty with the war in Iran will either cause fuel prices to increase further or create a state of limbo “where we don’t know where the price is going from day to day.”
Air Canada and WestJet are indicating reductions to come to its flight schedules amid the rising fuel costs.
“We often look at the airline industry as sort of a leading indicator of where our economy is going,” says Sheehan. “When we start to see companies and individuals dial back their spending on airline travel, that tells us that their mindset is that the future doesn’t look as good.”
ohn Gradek, an expert in aviation management and faculty member at Montreal’s McGill University, says there hasn’t been a global fuel shortage of this magnitude in the airline industry since the 1970s.
“Probably about 25 to 30 per cent of the world’s aviation fuel does originate in the Middle East so it is a significant impact on the airlines,” says Gradek in an interview with CTV News Channel. “Prices, yes, are going up. But I think the big tsunami that we’re going to hit is going to be supply.
“We’re going to start running out of aviation fuel probably within the next week or two in various parts of the world. And that will be the real kick that travellers and passengers will feel.”
Gradek says it takes about seven to eight weeks to move aviation fuel from the Middle East to airports across the world, with Feb. 26 being the last time a ship with aviation fuel sailed through the critical Strait of Hormuz.
“Parts of the world that rely totally on aviation fuel, and I would say southeast Asia is the prime candidate, you’ll see places like Vietnam, Malaysia, Philippines, probably even South Korea, to declare rationing for aviation fuel,” says Gradek. “And shortly after that, we’ll just look at a shortage of fuel altogether.”
With files from CTV’s Marcia MacMillan
This article was first reported by CTV News
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