‘No choice’: Airlines are passing rising jet fuel costs onto travellers

A Dalhousie business professor discusses how many airlines are adding a fuel surcharge to offset their rising costs.

Air travellers are experiencing higher fees, fewer flights, and tough choices as jet fuel prices surge.

Volatile oil and jet fuel prices have been swinging since the latest conflict in the Middle East began in February.

Lorn Sheehan is a professor with the faculty of management at Dalhousie University and an expert on air travel industry.

“This is a highly sensitive industry to anything happening in that competitive environment, that consumer environment,” he says.

“So that’s why we often see the airline industry is this kind of leading indicator of where our economy is going.”

Aviation analyst John Gradek said the cost of fuel has more than doubled in a matter of weeks, forcing airlines to find ways to recover losses.

“They’ve taken two strategies,” Gradek said. “One is the surcharges that we’re seeing, and the other is raising fares, and that’s been about 10 to 15 per cent in the last two months.”

If consumers aren’t feeling secure about their jobs or there’s more pressure on how they’re spending money, they cut back on discretionary items, according to Sheehan.

“So, leisure travel is a discretionary item. That trip? You don’t have to take that trip across the country, to Europe, or to South America,” he adds.

Jet fuel is the single largest variable cost for airlines. When those prices go up, budget airlines have a harder time absorbing those costs due to their razor-thin margins.

“They have almost no choice but to pass that on to the customers,” says Sheehan.

However, the surging cost of flying won’t become the norm. Sheehan says, in such a competitive industry, airlines don’t like keeping their costs too high for consumers.

“Because customers are so price sensitive, and it’s not even just the budget traveller that’s price sensitive, that means if another airline offers a lower price on the same route, customers aren’t sole-product loyal,” he explains.

“They’ll tend to switch to that other flight.”

But when oil prices eventually go down, he says airlines won’t be able to bring consumer costs down right away.

“There’s a bit of a lag effect,” he says.

Sheehan notes he’s normally an optimistic person, but he’s seeing the glass half-empty on what the airline costs are saying about the economy.

“It’s because of all the uncertainty around what has caused and will continue to cause challenges for this industry in terms of the price of inaccessibility.”

With files from CTV News Atlantic’s Hafsa Arif