Escalating fuel prices could see more and more airlines introducing fuel surcharges – putting pressure on already overstretched shippers.
This was the general consensus among airfreight industry representatives contacted by FTW, with South African Airways (SAA) Cargo acting GM, Justice Luthuli, pointing out that fuel surcharges were adjusted regularly in line with the fuel price changes.
“We assess the markets and respond accordingly. In this case, as a business, you are bound to try and find a balance to be financially viable and also take into consideration the financial strain faced by customers,” he said. Commenting on how fuel surcharges could affect airlines’ competitiveness, Luthuli pointed out that airfreight was a “highly competitive” industry with ever-changing demand patterns, depending on environmental conditions, which meant that airlines with bigger operational budgets could seize the opportunity to gain market share and offer lower freight rates.
He told FTW that the higher fuel prices had had a negative effect on exports as they had driven up the price of exports, leading to decreased demand. “In essence, higher fuel prices impact on the entire rate composition,” added Luthuli. To mitigate the situation for their freight customers, Luthuli said the airline communicated surcharges and rate adjustments in advance to help shippers prepare for the increase. Linden Birns, MD of Plane Talking – which offers corporate communications services to the airline industry – agreed that airlines had been known to introduce fuel surcharges to help them recover from increased costs of the actual fuel purchased.
“At the same time, most carriers have already been revising their fuel hedging strategies and renegotiating their hedges,” he explained. Birns added that many airlines had begun investing in modern, fuel-efficient aircraft during the previous period of high oil/fuel prices. “The return of high prices will probably result in some airlines accelerating their fleet updates, especially those that deferred their modernisation programmes when fuel prices tumbled a couple of years ago.”
In addition, according to Birns, airlines, aircraft manufacturers and air navigation services have been collaborating on new, simpler flight departure and arrivals routings and procedures to and from airports which reduce fuel burn.
“These involve more direct and continuous approach paths,” he said. Birns added that, for the most part, globally the airline industry was experiencing one of its most sustained profit periods and there was therefore greater builtin resilience to fuel price fluctuations.
CAPTION
A long-term view of the fluctuating jet fuel and crude oil price.
