The owner of British Airways and Spanish airline Iberia says it will have enough jet fuel for the summer ahead fears carriers will be forced to cancel flights
British Airways is set to impose fare hikes because of the Iran war – but reassured passengers flights would go ahead.
Owner International Airlines Group revealed it faced a £1.7billion surge in its jet fuel bill this year because of the fall-out from the Middle East conflict.
The firm, which also owns Iberia, Vueling and Aer Lingus, says it aims to recoup around 60% of that – about £1billion – through a mixture of higher fares and reducing costs. IAG declined to say how much of that would come through price rises, and will differ depending on the route and airline. But Luis Gallego, IAG chief executive, did say: “British Airways as a more premium brand will have a higher pass through.”
The company confirmed this week that it would not be following a number of rivals by adding fuel surcharges to recoup some of the spike in costs.
It came as IAG downplayed the threat of jet fuel shortages, amid reports of potential disruption over the coming months, even if the conflict between the US and Israel and Iran is resolved on a political level.
Jet fuel prices have soared amid the blockade of the Iran-controlled Strait of Hormuz, especially impacting shipments to Asia. The surge in jet fuel prices and threat to supplies in some countries has seen a number of airlines cut back on planned flights. Recent data showed 13,000 flights globally have been pulled this month.
IAG said it was “confident” it will have enough jet fuel for the big summer getaway. Mr Gallego said: “We currently see no issues with fuel availability in our main markets, particularly as we benefit from our investment in fuel self-supply at our hubs.”
Experts say airlines will go all out to avoid cancellations but concerns remain about potential cut-backs the longer the Iran war goes on.
Ms Gallego insisted it was “managing the uncertainty” caused by the fuel price increase. He added: “Whilst the impact of the higher fuel price will inevitably lead to lower profit this year than we originally anticipated, we are confident in our business model and strategy.”
IAG said it has seen “strong demand across most of our markets” but “softer demand” in the eastern Mediterranean. The company recorded a profit of £365 million during the three months to the end of March, up 76.6% from £207million a year earlier.
Russ Mould, investment director at broker AJ Bell, said: “IAG has warned that higher fuel prices will hit profits this year, but there are words of encouragement for anyone worried if their summer holiday will go ahead. IAG reports no issues with fuel availability in its main markets.
“Dependability is important in the airline industry. IAG avoiding widespread cancellations in a period clouded by fears of fuel shortages could help it to stand out from the crowd. Other airlines won’t be so lucky.
“Keeping customers on side is much more important during a crisis than making big money, as it can help build long-lasting trust.
“There are no guarantees that IAG will be able to stick to its scheduled flights post-summer. It flags the potential for jet fuel to be restricted on a global basis if the conflict lingers on.”
