‘It will hit consumers badly’: Oil price surge to trigger airfare hikes

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Peter Harbison, chairman of the CAPA – Centre for Aviation, said Qantas and Virgin were still trying to generate cash and get staff back at work by releasing cheap airfares into the market, but that would be temporary.

“After a while that desperate need for cash starts to get mitigated by a fairly keen need to make profits again,” he said. “Obviously prices are going to have to go up if oil prices stay where they are.”

Flight Centre boss Graham Turner said that oil would push up fares, but how quickly foreign carriers return capacity to Australia would have a bigger influence, noting that some Australia-US fares were particularly high.

“Once capacity comes back prices will become, I think, reasonably normal,” he told the AFR event.

Virgin Australia CEO Jayne Hrdlicka said last week that the competition between airlines as they tried to get their fleets back in the sky would keep fares low, even if some higher costs crept through.

“So we might see fares going up a little bit, but that’s off a very low base,” she told a Tourism Australia conference. “Consumers can be really confident there’s going to be great value deals to travel this amazing country for quite some time.”

Mr Joyce said that Qantas would be protected from higher oil prices in the short term by its hedging program, with 90 per cent of its fuel usage locked in until mid-year, 50 per cent for the September quarter and 30 per cent for the December quarter.

Qantas’ share price has fallen 11 per cent in the past week, closing at $4.52 on Tuesday, mirroring sharp declines in airline stocks around the world.

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