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High airfares may become new norm as jet fuel costs soar, says Asia-Pacific airline industry chief
Asia-Pacific airlines’ leader Wong Hong says high fares could become a lasting feature as carriers face much higher fuel and operating costs. Airlines are trying to balance covering those expenses with keeping tickets affordable enough to retain passengers.
Jet fuel has risen from about $80 to around $180 a barrel in a year, and accounts for roughly a third of airline operating costs. Airlines have raised fares or added surcharges since the Iran war began in late February; regional passenger traffic fell for five consecutive months from April to August, then edged up in September, while traffic for the first nine months grew 1.9%. Aircraft delivery delays and costly maintenance of older planes add to the pressure.
In short
- Jet fuel is around $180 a barrel, up from $80 a year ago.
- Fuel makes up about a third of airline operating costs.
- Airlines are weighing higher fares against the risk of losing passengers.
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The case for
Airlines may need to keep fares higher to cover a sharp rise in jet fuel, along with costly maintenance and delays in receiving new aircraft. If prices stay below the level needed to meet these costs, carriers could face weaker finances and reduce routes or service, leaving passengers with fewer options.
The case against
Keeping fares high risks making air travel unaffordable for some passengers and weakening demand, especially as regional traffic has already fallen for several months. Airlines could seek other ways to manage costs, and fares that remain too high may cost carriers customers and undermine the recovery in travel.
Explained simply
Airlines have several major costs, including fuel, aircraft maintenance and staff. Fuel prices can change quickly, and when they rise, airlines may charge more for tickets or add surcharges to help cover the extra expense.
The Asia-Pacific airline industry includes carriers that fly within the region and connect it to the rest of the world. Airlines must weigh higher costs against the risk that passengers will travel less if fares become too expensive; delays in receiving new aircraft can also mean keeping older planes in service for longer.