Another day, another airline price hike. Today it’s the turn of SriLankan Airlines, which introduces a fuel surcharge on all its air fares.The annoucement has been hedged with comments about the unprecedented rise in world fuel prices.

It says: “Crude oil prices which averaged around US$ 75 per barrel in 2007 have shot up to over US$ 141 for the first half of 2008, recording an 84% increase. In January this year, a barrel of crude oil was US$ 95.”

“At this juncture of volatility and soaring prices, the most practical way to respond to the sharp increase in cost (fuel consists of 52% of the airline’s cost as compared to 27% of the total cost last year) is by way of a fuel surcharge based on the distance.”

The surcharge differs according to the destination: Long Haul - $ 80 (one-way) Medium Haul - $ 45 (one-way) Short Haul - $ 25 (one-way).

The statement added: “Last year IATA (International Air Transport Association) predicted a record profit of USD 9.6 billion for the airline industry for 2008. This is not to be. IATA has since revised its prediction to a total net loss of between US$ 2.3 billion and US$ 6.1 billion for the airline industry in 2008 depending on the level of the price of fuel, with a further revision likely.”

“While this is the magnitude of the crisis caused within a year, the situation does not seem to be improving, despite analysts predictions. This situation will eventually lead to a fundamental re-pricing of fares and other drastic measures if fuel prices do not stabilise.”
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