In search of solution for high air fares
AS aviation fuel price comes crashing, air travellers are beginning to heave a sigh of relief that airfares on most international routes may also go down.
CHIKA EZEOKOLI writes that the onus is now on airlines to reduce fares.
FOLLOWING the reduction in the price of aviation fuel in the global market, air travellers are beginning to express hope that airfares should equally crash, particularly on all international routes.
Some few weeks ago when crude oil sold for more than $150 per barrel, the situation forced passengers to pay more for services, even for refreshments, which were hitherto free.
Apparently, air travel was no longer within the reach of many who had got used to it in recent years.
Airlines implemented 10 to 20 per cent reduction in the number of flights on domestic routes and had put expansion plans on hold. The path was that of consolidation rather than that of taking deliveries of new aircraft.
While all these were on, many airlines raised ticket prices to help counter higher fuel costs following increased oil prices. They predicted that surcharges could be introduced without damaging their businesses. This formed part of the talk of International Air Transport Association (IATA) executives meeting in Singapore recently.
The Geneva-based IATA, at its annual conference of about 150 airline executives recently, also recommended a three percent price increase for intercontinental flights from Europe and five percent for those from other regions.
IATA, which represented more than 270 airlines comprising 98 per cent of international scheduled air traffic, stated that for ticket prices, many, had already added fuel surcharges to ticket prices or raised fares to counter higher fuel costs, said reports from the IATA meeting.
Fuel cost represented 36.5 per cent of the price of a ticket, compared to 15 percent in 2000, according to the Air Transport Association (ATA), which estimates that jet fuel costs will rise to a record-breaking $59.5 billion in 2008, compared with $41.2 billion in 2007.
However, the issue of high-ticket fares is the same all over the world, even in Nigeria. And at the moment, people are paying more to fly, both international and domestic flights.
The cost of aviation fuel, otherwise known as JetA-1 has already gone up to 70 per cent in the past one year or so. Therefore, ticket fares have been climbing and may continue to do so.
Already, fewer people are flying, and airlines have begun trimming unprofitable routes and mothballing planes. Cut of up to 10 per cent of system wide capacity are likely. As of 2006, the average fare was 15 per cent cheaper than it had been in 2000, despite a 150 per cent rise in fuel costs
Airlines have raised fees and fuel surcharges this year as they tried to offset high costs for fuel, which peaked at record levels in the first week of July this year, just after the second quarter ended. Even with the increases, however, most major U.S. airlines lost money in the quarter.
Therefore, in the past two months, many airlines have cut back on the number of flights they operate, which many feared could push fares even higher. The Transportation Department based its figures on a sample of itineraries from April through June, excluding "abnormally high" fares.
It used the new figures to tout the department's proposal to auction takeoff and landing slots at congested New York-area airports. The Federal Aviation Administration delayed auctioning slots at Newark Liberty Airport this summer in the face of opposition to the plan from airlines.
The Department said a separate measure of fares, called the air travel price index, also hit an all-time high in the second quarter, rising 7.2 per cent from the second quarter of 2007. The previous high for the index was set in the first quarter of this year.
The price index measures changes in fares based on identical routes and types of service, while the average-fares figure is a sample of the actual amounts paid by consumers, including taxes and fees.
Ways to reduce fuel consumption, including good operational and maintenance practices, are being explored. Airlines are towing airplanes to runways to cut pre-flight fuel consumption, reducing passenger service and entertainment items, monitoring weather and air traffic at airports to adjust speed of planes to prevent circling overhead.
But the scenario is changing fast as the growth bubble has punctured and 2008 was described as a difficult year for the sector. It was reportedly said to be almost back to the days when flying was the prerogative of the rich and those flying at the expense of their employers.
International airlines are also reducing the weight of in-flight magazines and cutlery and jettisoning entertainment services. In India, too, efforts are on to cut down extra flab.
The question is, can passengers enjoy fare reduction with the cut in oil? The answer is yes and it is achievable.
For instance, airlines increased airfares when oil price skyrocketed to between $150 and $200 per barrel and charged in some cases over $50 surcharge. It is nondurable for them to remove surcharge now that everything seems to be going normally again.
Some carriers like Lufthansa German Airlines recently jettisoned surcharge policy on all its routes. The carrier disclosed that fuel surcharge on domestic German and intra-European routes will be lowered by three euros to 24 euros per flight segment.
On long-haul routes, the airline said that the corresponding fuel surcharge would be decreased by five euros to 92 euros per flight segment, stressing that the reduction will apply to all Lufthansa tickets issued on or after October 20, 2008.
The fuel surcharge reduction is coming at a time the Federal Government was looking at a way to engender competition with Nigerian carriers to break the strong hold of the European carriers on the lucrative Lagos-European routes.
The situation has largely contributed to the high fare charged on the Lagos-London, Lagos-Frankfurt, and Lagos-Amsterdam routes.
The rise in the price of the commodity had taken a toll on aviation fuel, otherwise known as JET-A1, as international carriers have started passing the cost to passengers, by doubling their fuel surcharge from $5 to $10. For some, it rose to over $50.
The situation forced carriers to apply fuel-cutting measures for their equipment by retrofitting airplanes with winglets. Winglets are the vertical extensions of wingtips that improve an aircraft's fuel efficiency by roughly three percent.
The situation also affected domestic carriers, as they increased airfares between 10 to 20 per cent after aviation fuel marketers further raised the pump price of the commodity.
The increasingly difficult financial position that some airlines got into because of rising fuel cost paved way for more consolidation in the global industry.
