BA, Iberia warn rising fuel costs may push up ticket prices
Ongoing violent clashes in Libya spark fears of supply shortages as price of oil tops $112 a barrel
By CFOWorld.co.uk | CFO UK | Published 13:20, 25 February 11
British Airways and Iberia’s newly merged company International Airlines Group warned on Friday that the unrest in the Middle East could force up ticket prices on the back of rising fuel costs.
Rising fuel prices pushed up BA ticket prices on long haul flights last month and the airline warned that costs could rise further due to the ongoing violent clashes in places like Libya.
IAG's chief executive Willie Walsh said: "We are monitoring the impact of the current Middle East instability on fuel prices and have the flexibility to change our capacity plans if necessary.”
"We will adjust the surcharge if we believe that is necessary," Walsh told reporters on Friday. "Given the increasing volatility in the fuel price in the last few weeks, if that volatility continues I think it's likely that increases will be seen in the market."
Oil rose more than $1 a barrel to top $112 on Friday as the revolt in Libya sparked fears of supply shortages. Refineries in Europe import about 80 percent of Libya's 1.3 million barrels per day of exports, analysts say.
IAG, which started operations on 24 January and is hedged for 53 percent of its fuel requirements in 2011, said its pro-forma fuel costs rose 5.2 percent or 49 million euros (£42 million) in the final quarter of 2010.
"We are reasonably hedged for the short term (76 percent for the first quarter of 2011) but the price of oil will clearly be a challenge to the market in the short term."
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