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Fuel adds fuel to economy traveler worries

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Rising fuel prices have claimed a bigger share in the total cost of flight, an increase from 12% a decade ago t0 43% today, which directly adds to the Airliner’s margin and the profitability. With crude expected to touch $130-$140 a barrel by the end of the year, analysts expect a few carriers pressing the panic button.

With already mounting pressures on global and Indian players to keep the prices unchanged, the rising crude price is a major matter of concern. One of the leading carries, Emirates which operates across Middle East, Asia pacific and Europe has said to have expressed worries and expects the fuel price to be stagnated between $60–80 for optimal operations to go on.

Indian players, on the other hand are better placed as of now, due to increasing customer demand, already thinning Air India operations, which have cast a shadow on the increased fares of low cost operators. With escalating crude prices, the industry is going to witness further price hikes.

Already Private players like Kingfisher Airlines, IndiGo Air and Jet Airways are concerned about the fare cuts announced by Air India from February which has resulted in combined 20% reduction of seats in their respective airlines. The fuel burden for Air India alone comes to $500mn. which would be the loss due to crude price rise for 2011.

The Indian traveler on the hand is in a dilemma of answering for himself, whether to attribute this change to the global inflation or to rethink on air travel as a luxury option meant for few only. With business travel already on a all time high in the country, the price speculations would mean a higher spend on travel which is not a welcome sign for the recession recovering business houses.

Source: Economic Times


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