(Montreal) Soaring jet fuel prices will have to be passed on to passengers — at least in part — even as competition intensifies among low-cost carriers, the airline’s new president, Swoop, said Monday.
Updated yesterday at 4:58 p.m.
Bob Cummings, president of the ultra-low-cost subsidiary of the WestJet group since last week, said in an interview Monday that low-cost carriers were trying to minimize the impact of labor costs and fuel on air fares, but that market forces still left their mark.
“We always adapt, almost in real time, to these market forces when input costs rise. And they really have to be passed on for the company to be financially healthy,” he said on his first day in office on Monday.
“We will do everything we can to minimize this and have affordable rates. »
The fallout from Russia’s invasion of Ukraine, including sanctions and oil import bans, helped push the price of jet fuel up 129% year-over-year. It was nearing US$153 a barrel as of April 8, according to the International Air Transport Association.
Fuel costs will be a major headwind for airlines in the coming quarters, National Bank analyst Cameron Doerksen said in a note to investors released last week.
Mr Cummings joins Swoop after a three-and-a-half-year absence from the company, having previously spent 13 years on WestJet’s management team. He expects bookings to top pre-pandemic levels this summer.
Other hurdles facing the company include rapid domestic expansions by rivals Flair Airlines and Lynx Air, as well as COVID-19 testing requirements.
Flair Airlines was down to just one plane a year ago, but expects to have 20 Boeing 737s in its fleet by the end of June as the Edmonton-based airline adds flights across the country .
Calgary-based Lynx Air, formerly known as Enerjet, aims to operate 148 flights per week on more than a dozen routes by July, all within Canada, according to its chief executive. .
Meanwhile, Swoop plans to fly to 33 destinations this summer, about half of them in Canada. It added five new US destinations: New York, Chicago, San Francisco, Los Angeles and Nashville, Tennessee. These routes will be served by 16 narrow-body Boeing 737 jets, six of which are expected to arrive throughout the summer.
“With pent-up demand […]we are hopeful that we will be able to fill these planes, ”said Mr. Cummings.
Travel demand among Canadians is growing after two years of lockdowns and other COVID-19 restrictions, but more bookings could plateau if fuel costs are passed on to passengers through higher fares said John Gradek, director of McGill University’s aviation management program.
“Generally what airlines have done in the past with these kinds of fluctuations is they’ve imposed fuel surcharges on their sales to try to recoup some of that increased fuel expense, and that is of course passed on to consumers. »
However, a competitive environment among budget airlines may convince them to consider different tactics, such as absorbing some of the cost of fuel.
“Which carriers are strong enough to do that — have the ability to absorb those price points? asked Mr. Gradek. “It will increase cash consumption, it will affect profitability. »