If you’re thinking of flying this summer book now before rising oil prices and growing travel demand push prices up even further.
Even before the war in Ukraine sent oil prices surging, the cost of oil was already heading upwards thanks not only to pent-up travel demand but also from a recovering global economy finding its way out of the pandemic.
“No question, when oil goes up, airline prices go up,” Richard Vanderlubbe, president of TripCentral.ca told Global News.
Before the war broke out in Ukraine, one analyst in the United States predicted that domestic airfares will rise six per cent a month until August, while international fares would also increase.
And it’s not just aviation analysts that are warning about price increases. The CEO of Australian airline Qantas, Alan Joyce, issued a similar warning.
“Unfortunately if they [oil prices] stay at these levels airfares are going to have to go up, and we’re going to have to pass them on,” Joyce told 9 News. He added that for every $4US the price of oil rises, it forces Qantas to raise airfares an extra one percent.
Canadian airlines have been non-committal about how fuel costs will affect their pricing. In a Canadian Press report, Air Canada said the cost of oil is always a factor in their ticket prices while WestJet would only say that it has not increased fares in response to current oil prices.
In the same report, Transat A.T. CFO Patrick Bui said the carrier might consider fuel hedging which means buying fuel for future use at locked-in prices in the hope that it will be lower than future prices. Several American airlines are already doing this to help mitigate rising expenses.
Complicating all of this is companies’ desire to take advantage of inflation to set higher prices to see how much they can get away with. In a CBC report, Jimmy Jean, chief economist for Desjardins Group, said inflation is familiar enough a concept to consumers right now that “it’s not a stretch to think that some businesses will raise prices or even exaggerate those price increases to kind of tease out to see [at what level] we’ll see a negative impact.”
Then, of course, there’s no telling where the COVID pandemic is going, as much as we all wish it would go away. If you do buy tickets in advance in order to lock in the price, be sure to read the fine print about the cancellation refund policy that goes along with it. Some Canadian travellers have been waiting since 2020 for their refunds.