Air fares to the US may rise next year despite the deregulation of services from Europe.
US authorities are debating introducing a congestion charge at New York’s JFK airport, with landing fees increased at busy times. This would add about £3 to fares.
However, an additional proposal to cut services to and from the airport by 20% would increase prices considerably more. The US government is reportedly in talks with US airlines to restrict services into New York in order to ease air traffic congestion.
At the same time, United Airlines led the way last week in adding a fuel surcharge to domestic fares to claw back some of the recent increase in fuel prices. Increased surcharges on long-haul fares appear inevitable.
Oil has risen 40% in price since August and from $55 to $95 a barrel since early this year, with every $1 increase in the price adding $30 million or more to the fuel bill of major airlines.
Carriers have so far been reluctant to increase fuel surcharges on fares, but analysts warn this situation cannot continue.
British Airways has hedged – contracted to buy in advance – 90% of its fuel for $70 a barrel. However, this level of hedging only extends until March, when BA will then have to buy at a higher price – meaning it will also have to consider increased surcharges.
BA is expected to reveal details at the end of this month of a new subsidiary carrier, codenamed Lauren, that will fly between major European airports such as Frankfurt and Amsterdam and New York.
The airline plans a full-service operation, flying narrow-body Boeing 757s, but the service will not be business only. Services should begin in mid-2008.
However, BA faces opposition from pilots who are demanding guarantees the subsidiary will not be used to compromise existing employment contracts.