RB mulling hiking airfares due to surging oil prices

|     Hakim Hayat     |

NATIONAL carrier Royal Brunei Airlines (RB) is prepared to hike the prices of its airfares to cope with rising global oil prices, its CEO Karam Chand said in an interview recently.

With the price of oil now hitting USD85 a barrel, several airlines around world, including regional ones such as those in China and the Philippines, have announced fuel surcharges as an extra fee to offset the increasing price of jet fuel and to ensure their routes remain economically sustainable.

Fuel costs for airlines, which is a substantial cost factor in the industry – in some cases making up to 50 per cent of operating expenses – have risen significantly as global oil prices rose to a 48-month high.

Chand said this reality is proving to be a challenging factor that is affecting RB’s business, as fuel is a very significant component of their overall operational costs.

“It is a challenge for everybody not just for the airline business, but other businesses as well around the world. The cost incurred from fuel is so heavy that we have to take a mitigating strategy such as this (raising ticket prices),” he said.

CEO of RB Karam Chand. – HAKIM HAYAT

The CEO added although RB is forced to implement such measures, the airline is closely monitoring the market situation and will take a flexible approach moving forward, tweaking fare prices as appropriate with the goal of not dampening demand.

“We are conscious about (the implications of raising prices) and don’t want the demand for tickets to fall off because people are price-sensitive, but it is our duty to make sure that we have a mitigation strategy for the fuel cost increase,” he said.

Airlines throughout the region including Cathay Pacific, Malaysia Airlines and Cebu Pacific have said this year they are adding a fuel surcharge to airfares in the face of continued rising oil prices.

Analysts are predicting that oil prices will rise to USD100 per barrel, triggered by new US sanctions on Iran, which kick in next month.

These penalties on OPEC’s third-largest oil producer would force the world’s biggest fuel guzzlers to seek alternatives sources, subsequently boosting prices as producers had capped production after the recent oil price slump.