Airlines face fuel, trade war headwinds going into 2019

Amid rising jet fuel prices, geopolitics and difficulty in getting preferred landing and take-off slots at congested airports in big cities, airlines at the recent APG World Connect 2018 in Monaco share how they are working to prop up their bottom line.

Jet fuel prices have risen by about 21 per cent end October, compared to a year ago when it was at US$78 per barrel.

Timothy Clark, president of Emirates, in an interview led by Bloomberg TV at the APG World Connect 2018, acknowledged that the key challenge faced by the airline in 2019 will be rocketing jet fuel prices that are expected to breach the US$100 per barrel mark. He said that rising jet fuel prices had taken a huge chunk of the airline’s profits in the first half of 2018.

Rising fuel prices a key challenge for airlines

While airfares may see an increase in 2019, he stressed that it “will be priced competitively in the market so that customers see the value in the product”.

Emirates on November 1 had launched a US$15 million global advertising campaign, Fly Better, its new brand promise. The campaign is also aimed at promoting its network and its hub in Dubai.

Karam Chand, CEO, Royal Brunei Airlines (RBA), said on the sidelines of the conference that his concern was the ongoing geopolitical issues and economic uncertainty may weaken demand for travel in 2019.

He said: “The ongoing trade spat between China and US, may impact emerging markets in Asia, which in turn could impact travel demand.”

To mitigate fuel prices which are expected to continue an upward trend in 2019, RBA “will impose fuel surcharge rather than hedge which is a practice that some airlines do, and it may not necessarily be successful”, said Karam.

Nana Haryana, senior manager alliance & international affairs at Garuda Indonesia, said the Indonesian flag carrier was looking at increasing its services on certain routes experiencing high loads.

His concern was “finding airport slots with preferred timings in busy cities such as Beijing, Shanghai, Guangzhou, Singapore and Amsterdam”.

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