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Will oil price rally mean even higher air fares?

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By illuminem briefings

· 2 min read

illuminem summarizes for you the essential news of the day. Read the full piece on Financial Times or enjoy below

🗞️ Driving the news: A surge in oil prices to $95 per barrel prompts concern over potential hikes in airline ticket prices in Europe
• The uptick in oil prices results from production and export cuts by Saudi Arabia and Russia, affecting airlines' profits and leading to increased fare prices due to high travel demand and limited aircraft supply

🔭 The context: Airfares have already escalated this year with carriers capitalizing on high demand amidst constrained supply
• European airlines, experiencing very high fuel costs, anticipate a further rise in ticket prices, with airlines adjusting flying schedules in response to rising costs

🌍 Why it matters for the planet: The potential rise in airfares and the decrease in flight schedules can affect global travel and the interconnectedness of economies
• With airlines striving to maintain profits amidst rising fuel costs, the accessibility and affordability of air travel may be impacted, influencing global tourism and business activities

⏭️ What’s next: Airlines are grappling with passing the increased costs to customers. If the demand for travel persists, customers may have to bear the brunt of increased airfares
• While European carriers have a significant advantage due to their hedging practices, US airlines, which typically do not hedge, are more exposed to fuel price fluctuations

💬 One quote: “In a high fuel environment fares obviously would need to reflect that… short-term volatility points towards increasing fares.” (Topi Manner, CEO of Finnair)

📈 One stat: The MSCI World Airlines Index has fallen 16 percent over the past three months, reflecting the challenging conditions the airline industry is currently facing

Click for more news covering the latest on energy

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