Steep oil price increase may result in higher airfares

MUSCAT, APRIL 2

With oil prices in their triple digits, international airlines will have little choice but to pass on some of this higher cost burden on to their customers in the form of steeper ticket fares, a top airline executive has warned.

Maen Razouqi, CEO of Kuwait Airways, acknowledged that higher fuel prices will financially impact airline operations.

“The cost of jet fuel is around 15 per cent of our total operating cost, so any fluctuation up and down definitely has an impact on airline operations,” he said, while wondering if steep fuel price costs would be part of a long term trend.

Razouqi made the observations during interactions with the Observer on the sidelines of the Arab Aviation Summit, which was held in Ras Al Khaimah recently, on the theme, ‘Roadmap to Recovery’.

Asked if airlines, and Kuwait Airways in particular, would increase airfares in response to higher jet fuel costs, the CEO stated: “We have to be competitive and for us to be competitive, we have a full team that manages our revenue and yield management. They are the specialists; they have the tools, and we will fulfil the customer’s requirement as much as we can. We will also position Kuwait Airways to be a competitive airline in the region.’’

Razouqi, nevertheless, voiced hope that oil prices – currently hovering at well over $100 per barrel – are reined in by the collective efforts of the Opec+ alliance of leading producers.

The outlook for the airline industry and air travel in general is “very positive,” he stated.

Asked about the likelihood that new outbreaks of the pandemic will not sabotage the recovery under way in the airline and travel sector, the CEO added: “I think we are all decided that we are in the post-pandemic stage, and this year is going to be the transition stage.”

He explained that safety precautions will still be a feature of airline and passenger safety during this phase, stressing that the health and well-being of passengers will be an utmost priority of carriers.