The next headache looks like fuel prices. Oil has been rising steadily and now sits $US93.
Fuel bill woe for Australian airlines
AUSTRALIA'S airlines have fuel prices on close watch, with a new surge to a 13-month high stoking concerns about the long-awaited recovery. Jet kerosene has reached $US92.95 a barrel, just short of the trigger point at which Qantas and Virgin Blue are hedged until June 30.
"If $US90-plus is the launch point for further rises it will make the recovery that much harder," aviation analyst Peter Harbison told the Herald Sun yesterday.
Mr Harbison, head of the Centre for Asia Pacific Aviation, said Qantas and Virgin Blue were in a no-win situation if the surge continued.
They would have to carry any increase on their books for now because hiking ticket prices or re-introducing an oil surcharge would drive customers to competitors, he said.
However, ticket prices must rise eventually because long-haul fares are not viable at existing levels.
In February, when jet kerosene was $US78.55 a barrel, Qantas head Alan Joyce predicted a $200 million rise this year in the airline's fuel bill.
Qantas then had hedged 76 per cent of its second-half fuel needs at $US94 a barrel -- just $US1.05 above the price of jet kerosene now on the Singapore market, which sets the benchmark for fuel bought by airlines operating in the Asia-Pacific region.
Virgin Blue is similarly threatened if prices continue to rise. It has hedged only 56 per cent of the fuel it needs to June at $US97 a barrel.
Mr Harbison told the Herald Sun yesterday that most of the airlines that survived the industry slump of the past year did so only because of the falling price of fuel.
An example was Air New Zealand, which posted a $NZ84 million profit after its fuel costs fell by $NZ335 million.
The past week's $US3 rise in jet kerosene prices has been attributed to encouraging reports about US economic growth and increased consumption in Asia.
US newspapers yesterday reported that oil demand could soar, causing prices to follow suit, once the American economy recovers.
Other factors could include higher Chinese demand, any escalation of tension between the West and Iran and speculation.
news.com.au