Soaring fuel prices, caused by the war in the Middle East, are weighing down the already slim margins of South African airlines.
The price of kerosene has risen by more than 70%, forcing some South African airlines to increase ticket prices and introduce temporary surcharges.
"The conflict in the Middle East, and of course the global restrictions on fuel movements, have had a considerable impact on the price of kerosene. We have therefore seen increases. Initially, they were around 70% in some coastal regions. They have increased even further since then," said Kirby Gordon, marketing director of FlySafair, an international low-cost airline based in Johannesburg.
For Safair Airlines, this price surge adds approximately US$2,000 per flight hour. Faced with this gap, the airline has introduced a surcharge of up to US$10 per ticket.
Analysts are warning airlines against making premature decisions, as jet fuel prices do not immediately reflect crude oil fluctuations.
"Globally, the standard for airlines to hedge fuel prices is six to twelve months. And they hedge up to 80 to 85 percent of their fuel. This means they lock in their prices for the next six to twelve months. So there shouldn't be this immediate domino effect that airlines are invoking with regard to jet fuel prices," said Guy Leitch, editor of SA Flyer magazine.
Given the inflationary situation, analysts are warning of a possible drop in demand in the sector.
"My biggest fear is that non-essential travel will become significantly more unaffordable, and that demand will fall quite sharply. So, obviously, we'll see fewer seats. Demand for seats will decrease. We'll see fewer flights operating. We'll see airlines start combining flights. And growth in the sector will be remarkably slow, or even reverse," said Guy Leitch.
The repercussions go far beyond soaring fuel bills. With the Middle East being a crucial aviation hub, flight reroutings and service suspensions are having far-reaching effects.
