The price of jet fuel is on the rise as a result of the war in the Gulf and has almost doubled in Europe since fighting began. The knock on effect on air travel is already showing. Hong Kong’s Cathay Pacific, Australia’s Quantas, Malaysia’s AirAsia, Scandinavian airline SAS, and Air New Zealand, have all implemented temporary or permanent surcharges based on air fuel increases.
So can we expect price hikes for flights closer to home and will they put a dent in out holiday plans?
“For now there are no obvious increases in air fares from Ryanair or Aer Lingus and accommodation providers are also not raising prices. Both Ryanair and Aer Lingus have hedged [bought in advance for a fixed price] for fuel, as do most airlines so they are somewhat protected. If the oil price remains high in the medium term that will impact air fares for the autumn and winter but summer should be okay”, says Paul Hackett, CEO of Click & Go Holidays.
But, he notes than consumer concerns over the cost of living and the cost of fuel have already affected booking volumes since the beginning of March. “Uncertainty is never good for business,” says Hackett.
“It might be early days and suppliers like us are probably hopeful that the Iran war will end soon. For the accommodation providers and the destinations, the reaction of other European holiday makers will determine pricing more so than any change in Irish consumers’ booking patterns.”
And those European consumer changes are already happening, adds Hackett.
“There has been a stronger booking pattern by European consumers for Portugal and Spain in the last two weeks with Cyprus and Turkey bookings slowing. Greece is affected to a lesser extent, hoteliers there are talking of bookings being down around 10 per cent.”
The key to booking flights in times of uncertainty is to have a good understanding of what is happening and why, according to aviation expert, Patrick Edmond.
“Fuel prices going way up because of the war in Iran is going to affect airlines differently because some are very well hedged, like Ryanair, which has de-risked its prices for the next year or so. Ryanair is one of the leaders in hedging their fuel and the other airlines wouldn’t have hedged as much and so much more exposed to the price going up.
“I’m pretty sure that the number of people wanting to go on holiday in Dubai over the next couple of months has gone down rather a lot. So, if you are Emirates, you’ve got an awful lot more seats to fill, and this is just classic airline revenue management at this point. The demand has gone down, but capacity is going to be the same, because Emirates can’t easily adjust their capacity. They have a schedule which it builds around all these flights coming into Dubai connecting to all these flights going out of Dubai so there’s only some tweaks they can do. This means they’ve got to sell a lot of seats and this is ‘Economics 101’ when the demand goes down and supply is the same, then the equilibrium price is lower. So in other words, prices will be lower.”
Edmond says some airlines are already beginning to pivot their business models as the airline world changes and targeting different markets.”
He gives as an example Wizz Air, a Hungarian, low-cost carrier, that competes with Ryanair in parts of Europe but doesn’t fly to Ireland. “They announced a couple of months ago that they were going to pull out of Abu Dhabi. They just shut down pretty much all of their routes to the Middle East.”
One of its new ventures however, might perk up the ears of fans of Irish football fans hoping the team will qualify for the World Cup via the play-offs this month.
Wizz Air UK has announced it would operate tailored chartered flights between the UK and the US for European football teams and supporters travelling to the US.
Anticipation of ludicrously inflated prices is already a talking point for fans hoping to book transatlantic flights from Ireland. Flights to Prague for the playoff semi-final against Czech Republic shot up by 159 per cent after the draw announcement last November.
Edmond, who is not a football fan, advises thinking outside of the box to avoid a likely explosion in flight prices from Ireland to the US if we make it.
“I am not a football fan but if I were and if Ireland qualified and I couldn’t get a direct flight, I would maybe be looking at direct flights to the US from European countries that don’t qualify, so limited extra demand for tickets to the US from those countries, and then I’d maybe book a separate Ryanair ticket to get to that country. For example, if Poland didn’t qualify, I’d go and look for flights from Warsaw to the US, and separately look for cheap flights from Ireland to Warsaw the day before.”
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter by Conor Pope on Zippay, you can read it here.