Airline adjusts to rising oil prices
At least one domestic airline is preparing for the worst case scenario if oil prices continue to rise.
President of SkyBahamas Randy Butler toldGuardian Businessyesterday that if oil prices don’t decline in the near future, he will have no other choice but to raise ticket fares.
“Fuel prices have gone up significantly and there’s no idea which direction it is headed,”Butler said.”We will have no other option but raise our prices if this trend continues, because we’ve had to absorb other expenses with other fee increases over the past few months. If the oil prices don’t drop, it will be an entirely different summer for the aviation sector in general.”
Butler’s comments came after several U.S. reports said that the airline industry will earn nearly 50 percent less in 2011 than in 2010, with increasing oil prices hurting profits. The International Air Transport Association has reduced its airline sector outlook for the year from$9.1 billion to$8.6 billion, which represents a 46 percent drop in net profits compared to the$16 million in revenues generated last year.
The SkyBahamas chief said he has to revise his expansion plans because of the oil prices, revealing that his attempt to offer a route into San Salvador had to be postponed because of the impact.
Other airlines may not be too far behind Butler and his proposed adjustments, with Director General for Tourism and Aviation David Johnson saying that other carriers have already made some changes.
“You’ve probably already seen some airlines charging fuel surcharges to soften the impact,”Johnson toldGuardian Businessyesterday.”There is a sense that this is a temporary surge in prices and there will be some decreases once things settle down in the Middle East, and prices should retract to pre-crisis levels.”
Johnson added that airlines have already taken several measures to combat the fuel prices, with some carriers modifying their fleets, which has allowed them to remain operational. He said if changes weren’t made by them, they would have been bankrupt.
“There will be no immediate dramatic changes, demand is still strong for travel and airlines are coming off a better year,”he said.
While Johnson is optimistic that the sector won’t take a blow, Butler said this is the perfect time for the aviation sector to come together with the tourism industry.
“The only way the tourism industry is going to survive in The Bahamas is airlift,”Butler said.”The transportation sector has to hold hands because in order to survive we need to collaborate and find more creative ways to market the country.”