Airline ticket shock | Local company

Are you leaving T&T for the July/August holiday period?

Are you shocked by the price of plane tickets?

The long holiday period of 2022 is an expensive time to fly.

“July/August is usually the most expensive time to travel, but this year has been the most expensive we have seen. In some cases tickets have cost double or triple what they usually are for this period, Joanne Johnson, travel consultant at Trinidad-based Smartsev Limited, told The Sunday Express.

Part of the reason for the surge in fares is that more people are looking to fly, having been locked down for the long holidays of 2020 and 2021.

But airlines around the world are also grappling with higher jet fuel prices, as are crude oil prices, which have soared to over $100 a barrel.

To cope with higher jet fuel prices, some airlines have added a fuel surcharge and others have passed part of the cost on to their customers.

Majority state-owned Caribbean Airlines (CAL) has not added specific fuel charges, but some of the additional costs have been rolled into its airfares.

Right now, the cost of jet fuel accounts for 25% of the company’s operational costs, said Dionne Ligoure, corporate communications manager at CAL.

Going forward, she said CAL plans to spend about US$3.29 a gallon on fuel. This equates to US$0.87 per liter or TT$5.91 per liter

“Please note that this figure is subject to change given market volatility,” she said.

Asked about the provision that has been made for higher jet fuel prices in CAL’s budget, she said, “Fuel is a normal part of operating costs and would therefore be funded through operations.”

She explained that while aviation is a highly regulated industry, jet fuel prices and its supply and demand are beyond the direct control of aviation stakeholders.

She told the Sunday Express that all CAL flights have been affected by fuel prices, but “every airline in the world has been affected by the cost of fuel”.

CAL does not receive any additional government subsidy on its local kerosene costs. All forms of fuel support ended Oct. 1, 2013, Ligoure said.

“Fuel prices are a factor and we are watching fuel prices closely,” she explained.

While at T&T, CAL sources jet fuel from National Petroleum. National Petroleum, in turn, sources fuel from Paria.

Ligoure observed that the cost of refueling depends on the destination and therefore CAL is subject to the price at that time.

“There are variable factors depending on the destination,” she observed.

She noted that the July-August period is usually a busy travel period for CAL, and that applies to 2022.

“I hasten to add that 2022 also remains a year of recovery for CAL. And for regional and global airlines,” she said.

She said that despite concerns about baggage and travel delays plaguing other airlines, CAL teams are well prepared for the July/August travel window.

“Customers just walk in with the required documents and leave the flight to us,” she said.

CAL’s fleet includes 12 Boeing 737s and seven ATRs and operates more than 600 weekly flights to destinations in the Caribbean, North and South America.

Global Challenge

A Reuters article in April said the International Air Transport Association (IATA), of which CAL is a member, said industry losses are expected to be reduced to US$9.7 billion in 2022. is an improvement over the US October 2021 forecast. $11.6 billion in losses.

“IATA has estimated that at US$192 billion, fuel is the industry’s largest cost item in 2022 (24% of overall costs, compared to 19% in 2021). This is based on an average forecast price for Brent crude of US$101.2/bbl and US$125.5 for jet kerosene. Airlines are expected to consume 321 billion liters of fuel in 2022 compared to 359 billion liters consumed in 2019,” he said.

“The war in Ukraine is keeping Brent crude oil prices high. Nevertheless, fuel will account for around a quarter of costs in 2022. A particular feature of this year’s fuel market is the high spread between crude and jet fuel prices. This spread of jet cracking remains well above historical norms, primarily due to refinery capacity constraints. Underinvestment in this area could mean the gap remains high through 2023. At the same time, high oil and fuel prices are expected to see airlines improve their fuel efficiency, both through use more efficient aircraft and through operational decisions. But industry-wide profitability in 2023 looks within reach, with North America already expected to generate $8.8 billion in profit in 2022.

Two weeks ago, the New York Times (NYT) reported that jet fuel prices have stabilized somewhat since Russia’s invasion of Ukraine sent them soaring last month, but the market remains extremely volatile.

He noted that jet fuel prices, like gasoline and diesel, generally rise and fall with crude oil.

“The price spike has implications not only for airfares, but also for already high global shipping costs,” the NYT said.

He noted that Amazon announced plans to impose its first “fuel and inflation surcharge” on sellers whose goods it stores and delivers.

He reported that airlines have been able to pass on some of their extra fuel expenses to consumers, many of whom are more than eager to travel after being denied the opportunity for two years. Some airlines have also cut flights in response to ongoing staff shortages, creating greater competition and driving up fares for remaining flights.

“Carriers typically pass on consumers up to 60% of a volatile fuel price hike, experts said, a process that typically takes months. This time, however, the industry was able to pass on costs more quickly, largely due to strong demand and a shift in consumer behavior during the pandemic towards buying tickets closer to home. travel date,” the NYT reported.

“We are successfully recovering a significant portion of the fuel lift,” Ed Bastian, chief executive of Delta Air Lines, told investment analysts. “It’s happening almost in real time, given the high demand environment.”

“Delta paid an average price of US$2.79 per gallon for jet fuel during the quarter, up 33% from the last quarter of last year. The price included a saving of seven cents per gallon from the airline’s oil refinery outside of Philadelphia. Delta said it expects fuel prices to rise another 15 to 20 percent over the next three months, to between US$3.20 and US$3.35 per gallon, a range that includes savings of about 20 cents attributable to the refinery,” the NYT said. said.

“In February, American Airlines reported that the price it paid per gallon of jet fuel had increased by more than a third over the past year, from US$1.48 in 2020 to US$2.04. in 2021. At the time, she said everyone was bearing a one-hundred-pence hike in the price per gallon would increase their 2022 fuel spend by about US$40 million. This week American estimated it paid $2.80 to $2.85 per gallon in the first quarter of the year,” he said.

The NYT report noted that refineries produce jet fuel from the same batch of oil as diesel, and that refineries produce as much diesel as they can.

“Europe has reduced its purchases of Russian diesel since the invasion of Ukraine and has instead imported more diesel from the United States, even as road and rail traffic has resumed here. Refinery closures in Europe and North America in recent years have been another contributing factor. Since January 2019, refining capacity has declined by 5% in the United States and 6% in Europe, according to Turner, Mason & Company, a consulting firm in Dallas,” he said.

About Jonathan J. Kramer

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