The rise in fuel prices is due to disruption in the flow of crude oil through the Strait of Hormuz in the Middle East. The strait sees a significant portion of the world’s oil transit through each year.
Of the two local airlines, the first cab off the proverbial rank to announce fare rises was Air New Zealand.
The carrier says average prices for jet fuel have increased from US$85 to US$90 per barrel to between US$150 to US$200 a barrel. The price of refining oil into jet fuel has also increased dramatically, by up to more than fivefold, due to the conflict.
Air New Zealand has suspended its earnings guidance, published late in February, with the conflict “expected to meaningfully affect second-half earnings” and “implemented initial fare adjustments”.
The airline has also warned that more price increases could be ahead and that the impacts of the conflict could see Air New Zealand make changes to its schedule and network.
Qantas subsequently also stated that it has raised fares for international services, also citing volatility in the cost of aviation fuel. The Australian carrier said fuel prices “have risen by up to 150 per cent over the past fortnight”.
Qantas says fare increases will vary across its network of routes and warned that lower priced fares to Europe are selling fast.
The airline does not have transit stops in the Middle East on its routes to Europe, so the only adjustment made due to the current conflict is a fuel stop in Singapore for the carrier’s direct Perth-London service, due to flight path adjustments to avoid flying over the Middle East.
Qantas also flagged that its services to Europe were nearing capacity for March – with more than 90 per cent of seats on these flights already booked for the month. The airline says it is seeing some passengers booking alternative routes to Europe, including via the United States, South Africa and Asia.
Meanwhile Virgin Australia has cancelled all of its services to Doha in Qatar until at least Tuesday next week, while Qatar Airways has announced it will begin operating a small number of flights out of Qatar, including to Perth, London and Melbourne over the coming days.
