Airlines ready to expand as fuel prices drop
Monday, 18 August 2008: As fuel prices fall from record highs, it seems airlines are getting back on track with expansion plans and possible revisions to capacity cuts and fuel surcharges.
With less pressure on airlines and possible cutbacks on fuel surcharges, it is projected that traveller demand will increase, further boosting airline revenue according to the Centre for Asia Pacific Aviation (CAPA).
Asia’s airlines have been continuing to expand with scheduled aircraft deliveries arriving and if fuel prices keep falling traffic growth rates could surpass expectations.
Earlier this week Tim Clark, President of Emirates, said that if oil prices fell to around USD105 per barrel, the carrier would launch services to Durban, Algiers, Amsterdam, Kiev, Barcelona and Buenos Aires.
Earlier this week oil prices in New York fell to USD 113 per barrel, signalling a highly possible chance that Emirates will commence their expansion plans.
Smaller carriers such as Virgin Blue showed much the same expansion sentiments, with the CEO Brett Godfrey saying “even in this current climate where many airlines are reviewing their networks, our team is always on the look out for potential routes that could do with added competition and where we can make a difference by bringing down over-priced airfares”.
Other carriers such as Vietnam Airlines, Etihad Airways, Tiger Airways, Jet Airways, several Philippine carriers, China Southern, Korean Air have announced service expansions and new bases surpassing cutback announcements, reflecting the falling oil prices.
Cathay Pacific and Singapore Airlines have redeployed capacity from weaker markets to stronger demand markets, thus maintaining overall capacity levels.
Although, oil even at USD113 per barrel is still a lot of pressure on many airlines and several carriers will need to look at ‘strategic’ plans to maintain market shares.