We may be enduring an extended, sodden summer right now, but by the time we get to July, many Australians will be itching to clamber the coop and soak up some more hot weather.
Only problem is, logging onto Qantas, Qatar, Emirates or Singapore Airlines might leave you rubbing your eyes. Flights are expensive right now. Real expensive.
Take Qatar Airways for instance. A flight from Sydney to London in July flight currently costs between $1,700 and $1,951. A return trip is up around $3,000 to $4,000.
When it comes to Qantas, though it’s a tad cheaper, you’re still looking at dropping $3,000 to book a return trip to Europe in July. As for Emirates, we found a return flight to London for $3,599. On Singapore Airlines, we found a return trip in July for $3,893.
And are things going to go from bad to worse? Many think that’s unavoidable.
Comparing the standard routing for JL43 between Tokyo and London to today’s routing. pic.twitter.com/x28WGyOf3o
— Flightradar24 (@flightradar24) March 4, 2022
Why? Russia’s invasion of Ukraine is hurting airlines’ bottom lines for two reasons. One: some of them used to fly over Russian airspace (and now have to take a longer route around). Two: it’s making oil more expensive, as Russia, before the sanctions, was one of the biggest suppliers to Europe.
As news.com.au reports: “As the invasion approached its third week, Britain said it would phase out Russian oil by year’s end while oil giants BP and Shell announced an immediate halt to Russian oil and gas purchases and the European Union planned to slash gas imports by two-thirds.”
Russia has warned the sanctions will have catastrophic consequences. But the US has led the push anyway, with Russia accounting for less than 10% of US oil and petroleum imports.
In terms of airfare prices, Forbes reported on March 12th that ticket prices are determined by consumer demand, “so even when fuel prices are low but demand is high, ticket prices will rise.”
“Airlines also hedge their fuel purchases, meaning they buy their fuel in advance to protect against sudden price spikes. And, as you can see, jet fuel still hasn’t reached the record highs set in 2008.”
Forbes also reported: “Airfares will probably rise for your next vacation,” explaining “Prices were already trending higher, with airfares expected to rise 7% this month.”
While experts predict ticket prices will climb even higher, there’s some uncertainty about whether it will happen sooner or later,” Forbes added. “Energy prices are putting pressure on airlines to raise fares, but demand is also weakening in some markets. (Even when energy prices fall, airlines don’t necessarily lower their fares.).”
As for Australia, USYD Professor of Transport and Supply Chain Management Rico Merkert has told DMARGE the sanctions may not have as huge an impact on flight prices as you might think.
“The sanctions on Russian airlines will not be too big of a deal for Aussie flyers, unless, they want to travel to Russia,” Merkert told DMARGE.
“For Russian airlines, those sanctions are problematic, as they affect not just the leasing of their aircraft but also maintenance, repair and overhaul. Spare parts will be hard to come by and so it is not just about cost but about remaining operational overall.”
“The flight prices for Aussies are unlikely to be impacted by this though,” he added. “Freight rates for air cargo are more likely to increase (due to less capacity in the market) and of course, any detours around Russian/Ukrainian airspace will be impacting operating cost and schedules.”
“That is particularly relevant for airlines operating Europe to Northeast Asia routes, such as Finnair.”
Merkert finished: “What will have a bigger impact on airfares on flights of unhedged airlines are the elevated oil/jet fuel prices. The longer they remain above $100/bbn, the higher the chance of paying more for your flights to Europe or anywhere else (or to refuel your car).”
Qantas CEO Alan Joyce has said Qantas fares will increase by 7% for now to account for increasing oil costs. He also indicated there could be more price hikes coming.
At the Australian Financial Review Business Summit last Tuesday, Joyce said Qantas has hedged around 90 per cent of the fuel it needs through to the end of June, and 50% of its requirements for the September quarter.
“(Hedging) gives us time to react to that higher fuel price,” he said. “Unfortunately, if we stay at these levels, airfares are going to have to go up, we’re going to have to pass them on.”
Flight Centre managing director Graham Turner has warned that passengers could soon face a 10-15% increase in airfare prices, if oil prices hit US$200 a barrel.
Turner told The Australian: “My guess is with airline capacity increasing, we should get back to pre-COVID international airfares over the next six months, but the cost of fuel could put 10-15 per cent on an airfare.”
Maybe Byron Bay doesn’t look so bad after all…
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