The Fuel Surcharges Are On The Way!
While it is hardly a surprise, and you can hardly blame them, it looks as though we may see a number of fuel surcharges added to a whole array of flights over the coming weeks and months. As the price of crude oil reached $98 a barrel, United Airlines have been the first to come out and announce a fuel surcharge on the majority of domestic flights. It looks as though ticket prices will be increased by between $5 and $10 for the foreseeable future. But why now?
When you consider that crude oil has nearly doubled in 9 months and risen nearly 5 fold in just 6 years, they do have a strong case for the move. For United Airlines alone, a $1 rise in the price of oil increases their costs by some $65m a year – but for the industry the cost must translate into billions of dollars!
While many of the airlines have tried to push through ticket price rises in recent times, competition in the sector has held back much of their scope for legitimate price increases. It seems that the recent rise of crude oil, when all of the “experts” were predicting a fall, has been the last straw for some airlines. A move by an airline with the stature and presence of United Airlines has paved the way for many more airlines to come out and introduce their own fuel surcharges.
The airlines have been stuck in the middle of a two way pull for some time, with prices under ever increasing pressure due to competition in the industry, and base costs rising for some time – with the price of fuel the main concern. It will be interesting to see the impact which the oil rise has on the industry, as any prolonged period of high oil prices may well put some of the smaller and even major airlines under sever financial pressure.