Airlines have been put in a bind as fuel prices jump due to the war between the United States and Iran. They plan to raise fuel surcharges starting next month to offset losses, but the airline industry's off-season is beginning, increasing the likelihood that passenger demand will plunge.
According to the airline industry on the 12th, domestic carriers plan to raise international fuel surcharges next month. Airlines levy international fuel surcharges based on Singapore jet fuel prices from the 16th of two months prior to the 15th of the previous month. Because the U.S.-Iran war broke out on the 28th of last month, the recent increase in oil prices will be reflected next month.
Market research firm S&P Global Platts said jet fuel prices in the Asia-Oceania region averaged 290.79 cents per gallon (about 3.785 liters) from the 16th of last month to the 9th of this month. That is up 41.7% from the previous month's average price of 205.18 cents.
For this reason, airlines say they have no choice but to sharply raise fuel surcharges next month. Airlines also raised international fuel surcharges in March. That is because last month's jet fuel prices in the Asia-Oceania region rose 5.1% from the previous month.
By airline, Korean Air Lines raised this month's ticketed fuel surcharge by 20.8% from the previous month, and Asiana Airlines increased its fuel surcharge by 20.9% over the same period. Jeju Air also raised its fuel surcharge by 21.4% during that period.
Because of this, there is speculation that fuel surcharges may be imposed at levels seen in 2022, when the ripple effects of the Russia-Ukraine war pushed jet fuel to about $150 per Barrel (about 357 cents per gallon). On Korean Air Lines' Incheon–New York route, a fuel surcharge of 325,000 won was imposed.
However, many expect that even if airlines raise fuel surcharges, it will be difficult to improve their results. That is because the off-season will continue from this month until before the summer vacation period, making it likely that passenger demand will decline.
Last year, the average number of passengers from March to June, when there were no holiday breaks such as Lunar New Year and Chuseok, was about 7.53 million, while the average number of passengers from July to December, which includes the summer and winter peak seasons and the Chuseok holiday, was 8.12 million.
An airline industry official said, "Fuel surcharges are reflected directly in ticket prices, so consumers inevitably feel that airfare is expensive," and added, "Airfare sales will become even more difficult, especially with revenues already falling in the off-season."
For consumers, fuel surcharges are imposed based on the ticketing date. Therefore, if a ticket is issued when oil prices are high, passengers will pay a high fuel surcharge even if fuel prices fall by the actual departure date. Because of this, many have pointed out that oil price volatility has too great an impact on consumers' airfares.
The Ministry of Land, Infrastructure and Transport says it is not easy to adopt a system that imposes fuel surcharges by reflecting oil prices in real time. A Ministry of Land, Infrastructure and Transport (MOLIT) official said, "Changing the surcharge method could create various disruptions, so we need to carefully consider any system changes."