April 25, 2008, 19:30
South Africans used to the luxury of air travel may need to rethink future trips as the chance of higher fares increases. With crude oil prices touching all-time-highs, consumers already squeezed on the ground, may have to cough up more money to fly.
The price of jet fuel prices has shot up four fold since 2000. The fuel is a product of crude oil and generally tracks its price movements. Higher oil prices, recently hitting heights of $120 a barrel, will feed into higher jet prices and this is contributing to spiralling airline average operating costs.
"In the year 2000, the jet fuel price as a proportion of operational costs was about 20%. Up to the year 2007, that moved up to about 30% and is probably now in the region of 40% of operating costs," says Chris Zweigenthal, deputy chief executive of the Airlines Association of Southern Africa.
The introduction of low-cost airlines and increased competition means that airlines are less keen to pass on all of their costs to consumers. South African Airways (SAA) has says there will be no astronomical increases in airfares as a result of rising oil prices. Higher costs put pressure on airline profitability.
The fuel levy surcharge element on air tickets is unlikely to escape some transfer of that cost. "As the jet fuel prices increases, so those surcharges will be adjusted to take account of market movements in oil prices," says Zweigenthal.
Airline competition, particularly among the low-cost carriers, should continue to see competitively priced air travel. But it does not escape the fact that fuel costs - now a significant component of operating costs, are going up.
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