Buckle up: plane tickets could still get much more expensive

{"text":[[{"start":4.2,"text":"If you are thinking about booking your summer holiday, now would be a good time. The price of airline tickets, already higher since the start of the war in Iran, is nowhere near where it needs to be if a prolonged disruption to jet fuel supplies looms. "}],[{"start":18.1,"text":"So far, the industry’s reaction to a near-doubling in the price of jet fuel — which like so many essential commodities depends on passage through the Strait of Hormuz — has been tepid. There’s no single number that captures plane ticket prices, but Lufthansa reckons customers who booked flights for April after the war began paid 12 per cent more per kilometre than those who bought before. Demand has nonetheless held up. Major carriers have announced only a smattering of schedule cuts. "}],[{"start":45.45,"text":"Airlines have managed to avoid greater turbulence because jet fuel hasn’t actually run short — yet. For weeks after the conflict began, cargoes that had left the Middle East prior to the closure of the Strait continued to arrive, and stored products made up the slack. That will not be true for much longer: in Europe, for instance, Goldman Sachs estimates commercial jet fuel stocks could fall to the International Energy Agency’s critical 23-day threshold by the end of May. "}],[{"start":null,"text":"

"}],[{"start":73.80000000000001,"text":"Once buffers are exhausted, jet fuel consumption needs to fall by a fifth in order to meet the drop in supply. Assume — as Wood Mackenzie analysts do — that for each 10 percentage point rise in jet fuel prices, demand falls by 1 per cent. It would take a tripling in price compared with the pre-war period to scythe the requisite 20 per cent off consumption. If that sounds extreme, think that prices have already doubled."}],[{"start":100.20000000000002,"text":"How does that play through to fares? Imagine an airline that wants to avoid cutting back on its flights and preserve its profit. Given that, on average, European carriers’ fuel costs were about a quarter of revenue last year according to Bernstein research, it would have to increase the cost of a ticket by 50 per cent."}],[{"start":119.10000000000002,"text":"Some airlines will have no choice but to ground planes, which will lead to elaborate trade-offs. Airlines will try to preserve profitable summer routes; short-haul leisure hops may get axed faster than transatlantic trips. Stronger, well-capitalised and well-hedged carriers such as British Airways-parent IAG and Ryanair may opt to keep prices down and capacity up in order to take share from their weaker rivals."}],[{"start":144.15000000000003,"text":"Of course, there is a separate consideration: if a fifth of global flights were at risk of being halted, it would cause significant disruption for companies and households used to crossing oceans with relative ease. That is another reason the hostilities cannot end soon enough."}],[{"start":167.05000000000004,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778410671_9236.mp3"}