Ukraine war to hike airfares as oil costs surge: Flight Centre

Surging oil prices due to the Ukraine war could increase airfares up to 15 percent, predicts the boss of travel firm Flight Centre.

Qantas boss Alan Joyce said the airline will have to increase fares by as much as 7 per cent because of rising oil prices. Picture: AAP Image/Joel Carrett

Surging oil prices due to the Russian invasion of Ukraine could increase airfares up to 15 percent, says the boss of Flight Centre Graham Turner.

Mr Turner said fuel costs make up between 30 and 45 percent of an airline’s overall costs so oil at above US$130 a barrel would have an impact.

“Overall ticket prices could rise between 10 and 15 percent,” said Mr Turner. “The airlines will feel it more when their fuel hedging comes to an end later this year.”

But Mr Turner, who spoke at the QUT Business Leaders Forum yesterday, said he did not see the price increase scrimping demand for travel as the world emerged from the COVID-19 pandemic.

He said travel demand was bouncing back quickly with airlines such as Qantas ramping up domestic flights. Internationally there was strong demand for traditional destinations such as Bali, the UK and the US.

Mr Turner said Flight Centre was currently recruiting about 600 staff in Australia as it rebuilt the business following the pandemic.

The company’s headcount had dropped from 21,000 globally to 7000 but there were plans to rebuild employee numbers to 85 per cent of pre pandemic levels. The number of Flight Centre shopfront had dropped from 950 before the pandemic to 450. “We will still have our stores in the best locations,” Mr Turner said.

Flight Centre CEO Graham Turner. Picture: Tara Croser.

He told the leaders forum that the company had set up a “war room” during Covid-19 as it moved into survival mode and borders were closed.

He said physical store fronts remained important, especially for high margin travel arrangements, but the company was investing heavily in digital sales allowing people to book online.

“We won’t come out of this with the same number of people or with the same costs but will probably emerge stronger,” said Mr Turner.

Flight Centre expected to return to profit on a monthly basis sometime this financial year after heavy losses during the pandemic.

Earlier in the week Qantas chief executive Alan Joyce warned the airline will be forced to raise airfares by as much as 7 per cent in response to the soaring cost of jet fuel.

“Unfortunately if we stay at these levels, airfares are going to have to go up, we’re going to have to pass them on,” he told a conference in Sydney.

“If it moves further, for every $US4 on the barrel, it’s another per cent that airfares have to improve by.”

Originally published as Ukraine war to hike airfares as oil costs surge: Flight Centre