SEAT-ONLY

SEAT-ONLY

With the cost of fuel continuing to rise, airlines may have no choice but to increase the price of their air fares.

Linsey McNeill reports

FUEL has suddenly become a burning issue, with the impact of rising fuel prices having far reaching effects on the airline industry.

Consolidators are warning air fares are set to rise across the board over the next few weeks unless the cost of fuel comes down.

Scheduled carriers have been reluctant to increase their consolidated fares in what is a very price-sensitive market, but those close to the carriers believe they will have no option than to put up rates if the cost of fuel remains high.

Some scheduled airlines have already increased their published fares by 3%, and others are expected to follow suit.

Airlines have blamed not only the rising cost of fuel for the increases, but also the strength of the dollar, which has pushed up costs. Unijet aviation director Claire Trevis said: “Only British Airways and British Midland have put up their consolidated fares, but we expect the other airlines to follow suit.”

She said BA and British Midland consolidated fares had risen by 3%. “Looking at the cost of fuel, I don’t think airlines will have any option but to impose similar increases,” added Trevis.

Gold Medal Travel said although 95% of airlines with which it has contracts had not increased their fares, it was expecting them to do so by early next year.

General manager air product and operations Nigel Fell said: “Even if they don’t come into effect until next year, I think it’s inevitable if fuel prices don’t come down again in the near future.”

As the increases are not likely to hit double-digit figures – at least in the short-term – they are not expected to have any impact on business, according to consolidators.

Travel 2 air product director David Gibbs said: “The market won’t allow big fare increases. Each airline must remain competitive and there’s a limit as to how much travellers are prepared to pay.

“Consolidated business remains important to airlines and they are very conscious of the need to retain market share in this highly competitive market.”

Gibbs said there was little scope for airlines to increase fares while capacity levels to all the main markets remained at the current high levels, although some carriers, including British Airways, have already announced plans to cut capacity next year. In the meantime, consolidators expect airlines will continue to promote special offers to stimulate travel during the low season, particularly from January to March next year.

“Hopefully some airlines will bring out special offers fairly early on and this will have a domino effect, with other carriers following suit,” said Fell.

Charter operators are also anticipating a price hike in the future.

Only a handful have already put up their fares, possibly because these operators have resisted passing increases in their costs on to their in-house seat-only divisions. But they are asking the non-vertically integrated operators to pay more for their seats.

Avro’s fares for summer 2001 are 6%-7% higher than last summer’s, adding about £7 to the cost of a flight to Spain. Distribution director John Fitz-Gerald said the increase was due to the rise in fuel prices.

Interestingly, Avro’s sister seat-only operator Cosmos Flights said the increase in the cost of fuel had not yet affected its costs “as these were fixed at contract stage”.

JMC Airfares said its summer 2001 programme had been priced, in many cases, at the same level as summer 2000. But a company spokesman said: “Should overheads increase, JMC Airfares seat-only programme will understandably be reviewed.”.

Unijet’s Claire Trevis said: “We are in the hands of the airlines. They haven’t put fares up yet, but if they say prices have to go up, we will have to pass the increase on to the consumer.”

Christmas bookings are pretty buoyant, with traditional routes such as the Canaries and Florida selling well.

Cosmos said there was still availability on some departures over Christmas, Easter and February half term on selected routes, but added that these popular dates were selling out fast.

In line for fare increases: many airlines are expected to follow BAand British Midland’s 5% price rises