Recent increases in the price of oil could spell the end of budget priced flights, experts are warning, with investment bank Credit Suisse insisting that urgent action needs to be taken.
Larger companies such as British Airways, Air France-KLM and Qantas are hoping to trade their way out of trouble by increasing fares, but things will not be so easy for budget airlines Ryanair and EasyJet.
Ryanair have admitted that the recent increase in oil is ‘really hurting’ and a rise to $140 per barrel would force the business into a loss.
EasyJet admits fares will have to rise, but says it will still be cheaper than competitors. “In the long term no industry can exist if it doesn’t cover its costs. However, that cost is very different for different airlines and it is incumbent now on all airlines to look at all areas of their costs base to see where other costs can be axed to keep fares low,” said Toby Nicol, EasyJet’s director of communications.
Cheif executive at BA Willie Walsh has predicted that the cheap flights era will come to an end with bargain priced loss leader fares of £39.00 set to disappear, forcing EasyJet to retaliate by saying “BA may no longer be in a position to offer such low fares but EasyJet still is.”
Fuel costs account for a third of airline budgets in an industry that has repeatedly had to cut costs to remain competitive, the extra costs will no doubt cause some anxiety to the business over the coming months.
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