High aviation fuel prices cut airlines’ profits

The airline industry could register reduced profits this year due to escalating aviation fuel prices, resulting into high operational costs. Mr Coen Asjes, the KLM country manager told Daily Monitor that while jet fuel accounted for only 13 per cent of an airline’s total operating expenses a few years ago, it has since increased to over 30 per cent currently.

Most airlines flying the Entebbe route had managed to keep up with rapidly rising fuel prices without necessarily raising fares. However, this is not sustainable in the long run and players would soon be forced to raise air ticket prices.

Projected prices

According to the International Air Transport Association, the cost of fuel is the average oil price for 2011 is now expected to be $110 per barrel, a 15 per cent increase over the previous forecast of $96 per barrel.

It further indicates that for each dollar increase in the average annual oil price, airlines face an additional $1.6 billion in costs. Airlines in America are said to have raised fares seven times this year on account of high operating costs resulting from high aviation fuel prices.

Covering expenses

Last month, airlines in America and Europe also began charging fees to check baggage services that they once offered at no cost to help cover the extra expenses. Mr Asjes who was speaking at the sidelines of a KLM and Kenya Airways organised party to recognise the role played by travel agents in Kampala last week further noted that effective harnessing of Uganda’s potential for incoming tourism would boost the aviation industry in the country.

Meanwhile Kenya Airways is in the process of offering a rights issue in both Uganda and Kenya, according to airline’s Country Manager Uganda, Mr Donald Ajuoga.

Source:  http://in2eastafrica.net