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Expect to pay more to fly amid skyrocketing fuel prices, analyst warns

Click to play video: 'Longer term impact of soaring fuel prices, with increased pain at Lower Mainland pumps' Longer term impact of soaring fuel prices, with increased pain at Lower Mainland pumps
The conflict in Ukraine is once again being reflected immediately in B.C. by the volatile price at the pump. Another record was set at many Lower Mainland gas stations Sunday, and does not bode well for those in the travel sector struggling to recover from the pandemic. Grace Ke reports – Mar 6, 2022

A B.C.-based airline consultant says the surging price of oil amid the war in Ukraine will likely mean the cost to fly will climb in the months to come.

Jim Scott, managing partner with Royal Pacific Consulting Group, told Global News the cost of jet fuel had climbed to from about 60 cents per litre in 2020 to about 85 cents per litre at the end of 2021, and could climb to as much as $1.50 per litre if Russian oil is removed from international markets.

“That would be a doubling of the fuel price for airlines in less than a year,” he said.

Read more: B.C. taxi industry calls for relief amid record-breaking gas prices

“Since fuel price is about 30 per cent of their total cost … they can’t absorb that so they’ll have to pass that on to the consumer.”

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Exactly when ticket prices could rise, or by how much, is less clear.

“Many major airlines hedge against fuel price hikes by purchasing contracts up to a year ahead of time,” Scott said.

Canadians will get a sense of how well domestic airlines have hedged soon, he added.

“That is something we will have to see, how well did the airline execs project this issue, and did they go out and pre-buy their fuel for the spring and the summer,” he said.

Click to play video: 'Business News: Cost of living rising again' Business News: Cost of living rising again
Business News: Cost of living rising again – Mar 6, 2022

Due to the pandemic, airlines are still not operating at peak capacity, Scott said. If prices are to rise, he suggested they would likely do so in the busy summer months when aircraft are full.

He said lower demand and pandemic debt, coupled with increases in Nav Canada and airport fees have already left airlines in a difficult financial situation, meaning potentially hefty fare hikes.

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“You’re looking at them having to maybe increase by 15 to 20, 25 per cent if they want to get to a break even point,” Scott said.

Travellers planning a getaway on B.C.’s coast, meanwhile, may not find themselves similarly affected on ferry fares.

BC Ferries told Global News Sunday that it did not currently have plans to raise prices amid high fuel costs.

Read more: Gas prices continue to hit new records. Here’s how to save at the pump

“We are aware of the volatility of fuel prices right now and are monitoring the situation. We are not considering an increase to the fuel surcharge at this time,” the company said in a statement.

The ferry company manages swings in fuel prices through a fuel surcharge system.

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That surcharge last changed in December, when BC Ferries eliminated a 0.5 per cent fuel rebate.

On Sunday, the cost of gas in Metro Vancouver surged to yet a new unprecedented record, with prices at some Vancouver retailers topping $2.10.

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