OREANDA-NEWS. March 14, 2011. Ukraine International Airlines announces that the dramatic increase in fuel prices will force the Airline to raise fuel surcharges, reported the press-centre of Ukraine International Airlines.

Aviation fuel is the biggest cost in air transport. The International Air Transport Association (IATA) figures show that every one dollar increase in the cost of oil per barrel increases the airline industries costs by about USD 1 billion. Higher fuel prices are undermining recovery in the airline industry and crippling many airlines.

There is no doubt that airlines must increase fuel surcharges if they are to survive.
Many airlines have already increased prices. Ukraine International Airlines has been closely monitoring the situation and has avoided increasing fuel surcharges to date. But this is no longer possible. The airline has to increase fuel surcharges across most of its network.

Over the past eight months fuel prices have increased by over 50%.

“Every 1% increase in fuel costs wipes USD 1million off our bottom line”, said Yuri Miroshnikov, UIA President. “Aviation is probably the most competitive industry in the world. Costs continued to increase while fares continued to fall. We are now at the point where airlines are heavily subsidizing their passengers’ travel. Fuel costs alone account for more than one third of the Airline’s costs”.

Today fuel costs of UIA are over USD 80 per passenger sector. On average, USD 160 of every round trip fare must be paid out for fuel. Many of UIA promotional fares do not even cover the cost of fuel.

Higher fuel prices have a double negative impact on the Airline. While they have an obvious direct impact on the cost of operations they also triggers economic recessions, reducing the demand for air travel. The most frustrating aspect of these high fuel prices is that they are not caused by demand, but by speculation; people gambling on making a profit. If only real users were in the market, and speculators controlled, the cost of fuel would be significantly lower.
UIA will be increasing fuel surcharges by approximately USD 10 per sector, which will not cause a dramatic increase in fares but will contribute to the Airline’s much higher fuel bill.