Air Arabia is prepared to raise fuel surcharges if tensions in the Middle East lead to a sudden rise in jet fuel prices, says its chief executive.
Air Arabia warns fuel price rise will hit tickets
Air Arabia will consider raising fuel surcharges if there is a sudden rise in jet fuel prices, the chief executive of the Arab world's largest listed airline warns.
The low-cost carrier has already hedged a quarter of its fuel needs for this year to help guard against the risk of rising oil prices, said Adel Ali, the chief executive of the airline.
"Fuel prices are a concern for the industry and the higher it gets the worse it gets," he said.
"You try to have a transparent relationship with customers so they know what to pay to travel but if all of a sudden fuel prices go up 20 to 30 per cent then you have no choice but to pass it on."
The cost of air fuel has rarely dipped below US$120 a barrel in trading over the past year as the Arab Spring and more recently concerns about Iran contributed to keeping fuel prices high. The IMF warned last week that crude prices could surge more than 20 per cent if Iran followed through with a threat to stop oil supplies because of sanctions imposed on it by the EU and the US.
In recent years the commodity has risen from 25 per cent to around 45 per cent of overall costs for the aviation industry, said Mr Ali.
Carriers have used fuel surcharges as a way of passing on the higher fuel costs to customers. Air Arabia last raised fuel surcharges in 2008 when oil prices touched above $140 a barrel.
Despite the risk of higher oil prices and the unfolding European debt crisis, Air Arabia is positive about the outlook for the year ahead, said Mr Ali.
The airline aims to achieve passenger growth of about 7 or 8 per cent this year, he said. Air Arabia carried some 4.7 million passengers last year, a 6 per cent growth compared with the previous year.
It added six routes to its existing network including Moscow and Yekaterinburg in Russia, Kharkiv and Donetsk in Ukraine and Gassim and Yanbu in Saudi Arabia.
"Our focus is to expand more into the CIS [former Soviet Union states]," he said. "There are quite a lot of routes we will be increasing frequencies to."
The airline, which is headquartered in Sharjah, is slated to take delivery of six new Airbus A320 aircraft this year, the same number as last year. It plans to increase its fleet from 24 A320s currently to 44 by 2016.