European and US airlines could remove more frequencies in the winter and ground more aircraft than usual as high fuel costs make weaker services uneconomic, aviation analyst John Strickland has warned.
Strickland, who heads up JLS Consulting, made the prediction
during a World Aviation Festival webinar on July 16, in which he
discussed how the aviation industry can respond to the current jet fuel crisis.
“No matter how much airlines reduced prices to stimulate
demand, they still wouldn't be covering the cost of the higher price of fuel.
And I think we'll see more planes on the ground as a result,” he said.
Airlines normally operate fewer flights during the winter,
when weaker demand can leave them with spare capacity.
They also typically use lower fares to stimulate bookings.
However, Strickland believes high fuel costs will make it
more difficult for carriers to justify operating marginal services this year.
“I think what we'll see this winter is a higher level of
cancellations,” he said. “I don't see airlines suddenly cutting
prices left, right, and centre in order to stimulate demand.”
He also stressed that some markets and cabin classes have
already seen greater price increases than others, while individual airlines’
exposure varies according to their hedging strategies and ability to pass
additional costs on to passengers.
The warning comes as the International Air Transport
Association (IATA) forecasts that fuel costs will rise by nearly 40% to $350
billion in 2026, with fuel accounting for 31.4% of total operating expenses.
Despite the pressure, Strickland said airlines had so far prevented the crisis from developing into the immediate supply breakdown some initially feared, with many carriers finding alternative sources of fuel or using hedging strategies to shield themselves from the full extent of short-term price increases.
According to Strickland, the number of services removed from
schedules has so far been relatively modest.
However, he expects these decisions to become more difficult
as the industry moves beyond the peak summer period.
Airlines are continuously assessing booking levels and individual route performance to determine which frequencies remain viable. -TradeArabia News Service