Delta Air Lines’ chief executive has said the company will be imposing fuel surcharges on international and domestic flights amid rising oil prices.
CEO Ed Bastian said at a Tuesday conference call that the fuel surcharge is a must “as the market conditions permit” and that raising the costs is “no question”.
The soaring fuel price has come in response to the invasion in Ukraine, as sanctions on Russia have cut off the world’s second largest oil producer, and the continuing post-pandemic recovery of the aviation industry.
Despite the hike, Bastian said, “we’ve not seen a stronger demand … in my career”, and customers are not shying away from travel yet.
Global domestic fares are set to increase 6 per cent per month until later this year, according to Linus Benjamin Bauer, founder and managing director of consultancy firm Bauer Aviation Advisory, who spoke to Insider in late February.
International fares will also increase 4 per cent every month, Bauer added.
According to the International Air Transport Association, which uses data from energy provider Platts, jet fuel price is currently 82.3 per cent higher than last year. The average price per barrel is currently $112.5, IATA cites according to current data.
Glen Hauenstein, Delta’s president said on Tuesday that the carrier needs “to recapture somewhere between $15 and $20 each way on an average ticket value of about $200”, but customers are still willing to pay for the pricier tickets.
Moreover, Delta and other airlines are reporting strong demand despite the higher price tags and ongoing conflict in Russia and Ukraine.
Bastian said, “as the conflict continues, there could be an element of caution. But we’re not seeing any significant impact”.
“It’s a little early to tell what’s going to happen to oil prices and consumer demand over the summer. You’d never want to be in a position of cutting capacity when you’re having such robust demand.”
In a boost to the aviation industry, Delta’s business travel has returned to 60 per cent pre-pandemic levels and is “continuing to push upwards”.
Delta is not alone in this, as competitors United Airlines, Southwest Airlines and American Airlines are also passing on the fuel prices to customers.
“We can make money at oil prices of $100 a barrel or higher, and we will,” said chief executive of American Airlines Doug Parker.
All major US carriers have said the prices are yet to impact demand.