War in Ukraine: plane tickets will rise in price, we explain why

Air traffic may be disrupted due to rising prices. (© DR Air France)

The war in Ukraine, which has been raging since February 24, has global economic implications.

Russian invasion fluctuations in the price of a barrel of oil. Result: a rising fuel priceswhich has a strong impact on motorists… But also the air sector.

As a direct consequence of rising prices for oil and therefore kerosene, that mixture of hydrocarbons used to make planes fly, plane ticket prices will also rise.

And raise the cost of summer holidays? Without a doubt, according to an Air France KLM spokesman. We have raised ticket prices from March 17, 2022, on long-haul flights for an amount that varies depending on the destination and the tourist offer,” he says.

40 euros more for long distance travel

However, the increase in the price of oil and the cost of a ticket, strictly speaking, are not correlated. “It’s more supply and demand which governs ticket prices. But fuel costs matter 20-30% of our total costs, which means that rising oil prices continue to have a very significant impact on all of our companies. And that is why yesterday we decided to raise the price of tickets,” continues the representative of Air France KLM.

So, for long-haul flight Paris-Havana for example or other Caribbean destination, “we apply surcharge 40 euros, for the flight at the current price of 619 euros round-trip,” he continues.

” He it is too early to say how long this increase will last, as our rates change from day to day, depending on a variety of parameters. At this stage, the increase only applies to long-haul flights,” says a representative of the French company.

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Hedging policy

Most companies are insured: they accept a coverage policy get fuel in advance.

This allows us to buy upstream fuel at a fixed price that does not change. Specifically, for the first quarter of 2022 we have already purchased 72% of the required fuel consumption, and for the second quarter we have 63% security. This figure gradually increases throughout the year, which means that we have only 28% of our fuel needs that are not covered.

Air France representative

This policy allows companies to buy fuel at below market prices.

In 2021, Air France KLM was able to obtain kerosene for 619 dollars per ton, while the market price was $676 per ton.

A win, which, however, makes it impossible to navigate when the price of fuel reaches crazy levels.

Differences between companies

So these increases depends on each company which apply, depending on the degree of their coverage, increase or not.

“The airline’s expenses are divided into three main areas of expenditure: one-third is for staff costs, one-third for kerosene and one-third for the rest. Today, fuel is growing by 20-30% on average, so it makes a big difference,” explains an expert in the aviation industry.

Budget companies suffer more, he says, because they use a lot of external staff and therefore have fewer employee-related costs, but a larger share associated with kerosene.

And it’s hard to predict if this trend will continue over time: “If the crisis continues, we can imagine that prices will rise in the long term, yes,” launches this expert.

No government assistance

And yet the airlines hoped helping hand from the government and sound economic and social sustainability plansubmitted March 16, 2022.

Created “to combat the sharp increase in commodity prices associated with the war in Ukraine”, it should not help the aviation industry.

“We do not have no specific help because all world companies are hurt by the price of kerosene, everything will be passed on. But we can expect an impact on tickets,” acknowledged Bruno Le Maire, the economy minister, during the presentation of the plan.

“Companies are asking the state for measures to help air transport, and in particular those that have already suffered before the crisis in Ukraine. In particular, a tax on the financing of flight safety is required, but nothing has been adopted at the moment, ”explains an expert in the aviation field.

The rise in fuel prices is not the only explanation for the rise in ticket prices: in response to the ban on flights of Russian aircraft over many Western European countries,

Vladimir Putin closed his airspace to European companies. Forcing aircraft to go around avoid it and therefore consume more fuel.

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