Airlines endure high jet fuel cost

Airlines will keep flight charges stable amidst rising jet fuel prices which threaten to reduce margins of the increasingly competitive industry.Dr. Titus Naikuni, the Managing Director and Chief Executive Officer Kenya Airways said that he is optimistic flying fares will remain constant despite the rough times the industry undergoing due to fuel hikes.
Jet fuel prices have increased above analysts' forecasts. The New Times / File
Jet fuel prices have increased above analysts' forecasts. The New Times / File

Airlines will keep flight charges stable amidst rising jet fuel prices which threaten to reduce margins of the increasingly competitive industry.

Dr. Titus Naikuni, the Managing Director and Chief Executive Officer Kenya Airways said that he is optimistic flying fares will remain constant despite the rough times the industry undergoing due to fuel hikes.

“We must look forward to deal with the challenges that remain and those that will emerge in the future,” Naikuni said, adding that despite shocks, Kenya Airways continued to register substantive profits.

Jet fuel prices have escalated higher than analysts’ projections.

According to the International Air Transport Association (IATA), the unrests in the Middle East pushed jet fuel bills to US$130 a barrel by March 2011 from US$107 by December 2010.

The 2011 figure represents about 33 per cent of operating costs of airlines.

“The industry by its nature is competitive,” the Chief Executive Officer of RwandAir, John Mirenge, told Business Times, adding that the increase in fares of one airline would lead to a loss of clients as more companies enter into the country’s nascent aviation market.

Any change in flight fares would also influence the growing trade between Europe, Dubai and the region which heavily relies on air transport.

“It (the price) went beyond ones expectations which is a challenge as we struggle to make flying more affordable for everyone,” Mirenge added

In a move that could offer some relief to the industry, IATA is pushing for a joint negotiation of airlines to agree with fuel suppliers to establish a price cap. 

Giovanni Bisignani, IATA’s Director General and Chief Executive Officer noted that after the industry’s historical decline in 2009, it registered tremendous success in 2010 as people resumed travelling and doing business.

IATA also indicated that whole of 2010’s demand statistics for international scheduled air traffic showed an increase of 8.2 per cent in passenger business and a 20.6 per cent increase in flights.

Airlines are looking for new ways on how to offset high fuel costs.

Mirenge noted that RwandAir has embarked on increasing maintenance precautions to reduce on the amount engines would have consumed and fuelling at cheaper airports.

In an attempt to reduce exposure to the volatile fuel prices, KQ opted for fuel hedging methods.

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