Oil prices push up AirNam’s costs

SOARING oil prices have pushed up Air Namibia’s jet fuel bill to 50 per cent more than what it budgeted for this financial year.

While the actual cost of the airline’s tickets is not expected to change dramatically before year-end, passengers can expect to feel the pinch in the amount they pay in fuel levies, which are added to the fare along with airport taxes. For Air Namibia’s intercontinental routes, a passenger can expect to pay around N$330 in fuel levies per ticket.But Air Namibia’s Operations General Manager André Compion said that the airline was not too concerned about the dramatic fluctuations in the oil price, and many other factors were at play to keep the airline competitive.”Obviously the increases have an affect on the industry globally and will signify losses on a global basis, but we firmly believe that the fuel price will normalise and that we will see decreases in the oil price and the fuel levy in the near future,” Compion told The Namibian.Fuel costs contribute between 30 and 40 per cent of Air Namibia’s total operational costs.Last week, the International Air Transport Association (IATA) upped its prediction for this year’s industry loss to US$7,4 billion as a result of skyrocketing oil prices.The revised forecast is based on an average oil price for 2005 of US$57 per barrel of Brent crude oil.In May, IATA forecast the industry loss at US$6 billion based on an average oil price of US$47 per barrel.Current oil prices have hovered at around US$63 a barrel.”Oil is once again robbing the industry of a return to profitability.Each dollar added to the price of a barrel of oil adds US$1 billion in costs to the industry.Cost reduction and efficiency gains have never been more critical,” said Giovanni Bisignani, IATA’s Director General and CEO.But for Air Namibia, Compion said while the increase in fuel prices would inevitably mean increased travel costs the world over, Air Namibia would have to consider other market forces, especially on its regional routes, before hiking its prices.”The fuel price does have a negative impact because it puts our yields under pressure and passengers have to pay more to travel,” said Compion.Air Namibia is also faced with highly competitive pricing from major airlines on its intercontinental routes.For this reason, Air Namibia would not be making any dramatic changes to its fares.Moreover, Compion said overseas tour operators had quoted and booked large groups based on fares Air Namibia put in place a year ago, and these could not just be changed overnight.Air Namibia currently flies between Windhoek, Frankfurt and London.For Air Namibia’s intercontinental routes, a passenger can expect to pay around N$330 in fuel levies per ticket.But Air Namibia’s Operations General Manager André Compion said that the airline was not too concerned about the dramatic fluctuations in the oil price, and many other factors were at play to keep the airline competitive.”Obviously the increases have an affect on the industry globally and will signify losses on a global basis, but we firmly believe that the fuel price will normalise and that we will see decreases in the oil price and the fuel levy in the near future,” Compion told The Namibian.Fuel costs contribute between 30 and 40 per cent of Air Namibia’s total operational costs.Last week, the International Air Transport Association (IATA) upped its prediction for this year’s industry loss to US$7,4 billion as a result of skyrocketing oil prices.The revised forecast is based on an average oil price for 2005 of US$57 per barrel of Brent crude oil.In May, IATA forecast the industry loss at US$6 billion based on an average oil price of US$47 per barrel.Current oil prices have hovered at around US$63 a barrel.”Oil is once again robbing the industry of a return to profitability.Each dollar added to the price of a barrel of oil adds US$1 billion in costs to the industry.Cost reduction and efficiency gains have never been more critical,” said Giovanni Bisignani, IATA’s Director General and CEO.But for Air Namibia, Compion said while the increase in fuel prices would inevitably mean increased travel costs the world over, Air Namibia would have to consider other market forces, especially on its regional routes, before hiking its prices.”The fuel price does have a negative impact because it puts our yields under pressure and passengers have to pay more to travel,” said Compion.Air Namibia is also faced with highly competitive pricing from major airlines on its intercontinental routes. For this reason, Air Namibia would not be making any dramatic changes to its fares.Moreover, Compion said overseas tour operators had quoted and booked large groups based on fares Air Namibia put in place a year ago, and these could not just be changed overnight.Air Namibia currently flies between Windhoek, Frankfurt and London.