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Travelers are flocking to the skies, U.S. airlines say, and in such high numbers that the carriers can cover the soaring cost of fuel, The Wall Street Journal reported.
As the Omicron variant ebbed, ticket sales shot up more than the carriers had expected, airline executives told the WSJ.
In February, bookings and revenue exceeded 2019’s levels for the first time since March 2020, the Adobe Digital Economy Index said.
“We’re seeing an increase in demand that’s really unparalleled,” Glen Hauenstein, Delta Airlines’ CEO, told an investor conference on 15 March. “That surge couldn’t come at a better time.”
The Ukraine war has driven jet fuel’s price to its highest point since 2008.
With demand so strong, those higher fuel prices will not jeopardize airlines’ recovery from the COVID era’s travel shutdown, industry executives said.
“We can make money at oil prices of $100 a barrel and we will,” Douglas Parker, American Airlines Group’s CEO, said at the conference.
Typically, fuel accounts for about 20 percent of an airline’s cost, second only to labor, but the price of jet fuel can demand as much as 30 percent of a carriers’ budget when oil prices spike.
To meet those expenses, airlines usually raise ticket prices and cut less profitable routes.
Delta is adding $15 to $20 each way for many of its round-trip tickets to pay the higher fuel costs.
“We’re very, very confident of our ability to recapture over 100 percent of the fuel price run-up in the second quarter and probably through the end of the summer,” Delta’s Hauenstein said.
American and United have said they will trim some flights, American by 10 to 12 percent this quarter and United “slightly,” the WSJ said.
Airlines also are seeing business travelers, a key source of profits, return in significant numbers; United’s corporate bookings have now reached 70 percent of their pre-COVID levels, the company reported.
TREND FORECAST: This data was released prior to the Ukraine war and spiking oil prices. Will the high fuel prices force airlines to jack up prices and make it unaffordable for many to fly?
As reported by OilPrice.com Willie Walsh, Director General of the International Air Transport Association (IATA), said two weeks ago that, “The past few weeks have seen a dramatic shift by many governments around the world to ease or remove COVID-19-related travel restrictions and requirements as the disease enters its endemic phase. It’s vital that this process continue and even accelerate, to more quickly restore damaged global supply chains and enable people to resume their lives.”
IATA’s chief acknowledged that “Absorbing such a massive hit on costs just as the industry is struggling to cut losses as it emerges from the two-year COVID-19 crisis is a huge challenge.
Therefore, while fuel prices at current levels will not decrease air travel, should Brent Crude spike above $150 per barrel, it will bring down air travel when the cost of tickets sharply increase to help pay for the rising oil prices.