The boss of easyJet has warned that fares will have to rise due to soaring fuel prices.
Chief executive Carolyn McCall spoke hours after the Organisation of the Petroleum Exporting Countries (Opec) unexpectedly left its production levels unchanged, a decision which will do nothing to curb oil prices.
McCall said: “We are planning all our budgeting around the fact that oil will remain high, at above $100 a barrel.
“Fares will rise inevitably because you have to pass on fuel some way or another, all other airlines will have to do it,” she said while speaking on Jeff Randall Live on Sky News.
EasyJet saw a pre-tax loss of £153 million in the half year to the end of March, almost double the previous year’s figure. That came after higher fuel prices cost the budget airline £43 million and a rise in passenger taxes added a further £21 million to its overheads.
However, McCall said that budget airlines, and in particular easyJet, would benefit in tough economic times. “EasyJet is all about passing on low fares to passengers and that is why we have that cost advantage.”
She added that easyJet’s losses were due to the winter season, claiming that figures would pick up over the summer, and said that overall the carrier was in great shape.
Oil cartel Opec had been encouraged to raise production to between 1 and 1.4 million barrels of oil a day over concerns that crude oil has become too expensive. But instead, the organisation left them at its present output ceilings.
Carriers such as Aer Lingus, Lufthansa, Alitalia and BA/Iberia owner International Airlines Group are just some of the European airlines that have reported losses in the past few months.
IATA warned this week that the world’s carriers would make combined profits of just £2.4 billion this year, down from £11 billion in 2010.
This time last year Brent Crude oil was trading at about $75 a barrel, but in April it hit $124. For every extra one dollar a barrel, the airline industry sees its annual fuel bill leap by $1.6 billion, or about £1 billion.
Furthermore, the price of jet fuel has outpaced the cost of crude in recent months and fuel is set to account for 30% of industry costs this year, whereas back in 2003 it accounted for just 14%.
The Opec will consider a hike within the next three months and its decision will be essential for the future of many budget airlines.