Aviation
Qantas says cost to fly may rise, Due to Soaring Jet Fuel Prices
Qantas has been absorbing a $200 million increase in fuel costs, the airline warned that if prices continue to rise, the costs may be passed on to customers and it may raise its already high ticket rates.
The airline reported in a market update that fuel costs have gone up 30% since May of this year, including 10% just in the past month. “This is driven by a combination of higher oil prices, higher refiner margins, and a lower Australian dollar,” Qantas stated.
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But Qantas asserted that it will keep an eye on fuel costs in the upcoming months and “look to adjust its settings” if they continue to be this high. Any modifications would aim to strike a balance between the need for reasonably priced travel in a situation where tickets are already high, according to Qantas.
Qantas and competing airlines use methods of hedging to control erratic pricing changes. An effort to win back consumer support that included an apology from the airline’s new CEO, Vanessa Hudson, and a commitment to rebuild the airline’s reputation after a “humbling period” is in jeopardy as a result of the warning about ticket prices.
Analyst Owen Birrell with RBC Capital Markets predicted that the firm will likely accept the higher fuel costs “until its target margins come under pressure, and then would seek to claw back those costs through capacity cuts and higher fares.”
Given the increased competition, expanding consumer and corporate cost pressures, and incoming reinvestment in the product/platform, we don’t think a substantial earnings shift is possible going forward.
