Commodities

High fuel prices hurt airlines’ profitability

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Passengers alight from a plane.

Passengers alight from a plane. Jet fuel prices eased at the end of 2012 but they have started rising again. FILE PHOTO. 

By Nicholas Kalungi

Posted  Wednesday, February 6  2013 at  02:00
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Despite performance improvements posted by airlines including those that fly within Africa last year, the rising prices of jet fuel tops the main obstacles to their profitability, the International Airlines Transporters Association (IATA) has revealed.

In its January report, IATA noted that even though increasing oil supplies from non-OPEC nations had helped to stabilise prices at the end of 2012, the prices are shooting up again, fueled by Saudi Arabia’s cut in crude oil production in December.

“Upward pressure on jet fuel prices eased at the end of 2012 but has once again started to rise. Compared to the recent low in November, jet fuel prices have risen 5 per cent in January, edging toward the higher-end of the price range seen over the past two years,” the report reads in parts, adding: “Probably the biggest threat to airline profitability is the rising price of jet fuel, which has risen above $130 (about Shs350,000) per barrel during January 2013, representing a 5 percent increase since November 2012.”

Challenges
Growing fuel prices was the major challenge of the aviation sector in 2012. The other challenge was low disposable incomes coupled with the Eurozone crisis that led to more preferences for trains and buses than airlines.

At the end of 2012, Mr Benjamin Puissant, the Brussels Airlines country manager for Uganda and South Sudan said in the face of these hurdles - mainly growing fuel prices - airlines have to find innovative ways such as offering additional services and signing regional partnerships to remain in business.