The war in Iran is driving up the cost of air travel due to volatile jet fuel prices
Experts say the Iran war is driving up the cost of jet fuel, which will drive up the cost of air travel.
“I think what you’re seeing happening now is a volatility in jet fuel that hasn’t been seen in years,” John Gradek, a former Air Canada executive and professor of aviation management at McGill University, told Global News.
“I think the instability started with the price of oil, when it reached 110 [a barrel] last week, or earlier this week, it dropped to 89 yesterday and up to 98 again today. So it bounces up and down. The impact of that on jet fuel is significant.”
Gradek said the price of jet fuel has increased by about 30 percent and fuel costs represent about 30 percent of the airline’s operating costs.
“The margins for an airline company are usually about three or four percent on their sales,” he said. “So right now, with fuel costs as we’re seeing, they’re losing money on every flight. So what’s happening is the airlines are trying, trying to figure out how much fuel costs to put in.”
Gradek said Air Transat has already started adding fuel surcharges to tickets and British Airways and Qantas are introducing more on Thursday.
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“The world is starting to realize that jet fuel is more expensive and fares are increasing,” he said.
Gradek said some airlines are trying to figure out what to do to keep costs under control, but also make a profit.
He said WestJet made a statement Wednesday that there was a significant increase in fuel costs, while Air Canada and Porter were still considering what to do.
“What level do you set your surplus based on the price of oil?” he said.
“And the price of oil is jumping all over the place. So it’s a motivating factor for them to, in fact, put more fuel money. But the longer they wait, the more money they lose. So they have to get a hold of this quickly.”
Wayne Smith, professor and director of the Institute for Hospitality and Tourism Research, said that paying for fuel is inevitable at this time.
“We have seen that the price of fuel went from 76 cents per liter to more than $1.30 per liter from December until now,” he said.
“People don’t realize that fuel is a big, big part of an airline. So let me give you a quick example here. A Boeing 777, once it takes off, burns 2,200 gallons of fuel. So when you look at that, that’s $2,800, about $2,900, just to go and fuel the main part by itself.’
Smith said airlines try to keep prices low, but travelers can expect to see a fuel surcharge on their bill.
“If you don’t see it in the price, you will see it in the additional payment afterwards,” he added.
Ashley Harold, a travel specialist for Flight Center Travel Group, told Global News that travelers will see varying prices, depending on the destination, time and competition on the route.
“Right now, we’re seeing Canadians focus more on tourism and where their dollar can be stretched,” he said.
“That’s what we’re seeing. And for people who have a certain budget that they’re hoping to stay on, we encourage them to seek out a professional, like a travel agent, to see where their budget can take them, where the Canadian dollar goes.”
Gradek said he thinks people will choose to fly within Canada and North America now, but the future is uncertain.
“The surcharges they want on Canadian traffic are probably between $50 and $100 one way as a surcharge,” he said.
“When I get to Europe, it’s about $100 to $200 one way. And when I get to Asia, it’s about $300 to $400 one way, so that’s a normal distribution of how these fuel costs have been handled in the past. So I don’t expect any unusual actions coming this time.”
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