If ever a week featured a microcosm of the challenges and opportunities facing the airline industry, this might be it.
The past few days saw crude oil – the price of which jet fuel tracks closely – fall back to around $100/barrel, having flirted with $130/barrel at some points over the past three weeks. That development probably says more about the volatility ahead than any definite reprieve from cost fears, but it is a move in the right direction.
In international travel markets that were already on a recovery path pre-Ukraine conflict, there is a sense that while any extra costs are unwelcome, they can be offset to an extent by strong demand and fares.
“You have seen it’s a very strong pricing environment right now, which makes sense given the pent-up demand, but also the input prices of fuel,” said Virgin Atlantic chief executive Shai Weiss during media briefing in the UK on Tuesday. “For the UK-US, we are seeing a very robust environment.”
Where recoveries are less-advanced, however, high fuel costs are hitting markets in a much more fragile state.
Taiwan’s China Airlines said this week that it expected its long-haul recovery to be “full of challenges” in the near-term given rising fuel prices.
And for new airlines, the impact is also significant. Start-up operator Norse Atlantic Airways said on Wednesday that it has pushed back the launch of ticket sales to April citing uncertainties stemming from the Ukraine conflict.
Elsewhere, a jarring dichotomy in government responses to the Omicron variant of Covid-19 is playing out and weighing on airline fortunes, even before fuel costs and other impacts from the Russia-Ukraine war are considered.
Chinese state-run media reported this week that a number of airports across the country – including those in Shenzhen and Shanghai – have significantly slashed flights amid the spread of Omicron, as the country continues to pursue a ‘zero-Covid’ policy.
In New Zealand, however, there was evidence this week that governments can map a way out of extremely tight travel restrictions, as the country said it would open borders to vaccinated travellers from visa-waiver countries from 1 May.
“It may be time to reconsider whether the codeshare and interline approach goes deep enough to capture the available synergies for expanding the network,” said the low-cost carrier’s chief executive Paulo Kakinoff on Monday.
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