Airlines in Australia and New Zealand are warning passengers to prepare for flights to increase by as much as a fifth, as fuel costs continue to rise.
The cost of aviation fuel has effectively doubled in the past year.
Air NZ CEO Greg Foran said it was a "reflection of
what we're dealing with and increasing prices."
Talking to NewsTalk ZB this morning the airline boss said that there would be a "significant increase for customers" fares to cover fuel costs, by as much as $200 a seat.
"To recover that we're having to move our prices by circa 20 per cent."
Fuel is a significant cost factor for airlines, representing between 15 per cent of a domestic fare and up to 35 per cent on some long-haul routes.
Airlines buy fuel under contract which has cushioned some of the price. However, following ongoing pressures on energy prices and a spike at the beginning of the year, airlines are now having to renegotiate.
The airline says this fare increase includes a 5 per cent increase which was added by Air New Zealand in March, to combat fuel costs.
Air New Zealand hedges a portion of its fuel consumption on a 12 month basis, in line with the airline's treasury policy, to stabilise the final cost. For prolonged increases, the costs will eventually catch up with the airline and have to be offset, normally by the customer.
Other airlines which have a high proportion of fuel under hedge may see a more sudden increase in fares when they come to renegotiate.
In March Qantas said it was covered for 90 per cent of its fuel under contract until the end of June. Last month the Australian carrier told Reuters that it would be making changes to fare prices to counter demand and rising fuel costs, but the adjustments would not "materially impact customers." The airline has been contacted for comment.
The demand for air travel is another factor pushing up the costs of flights.
With more travellers competing for limited seats as airlines are still playing catch up to rebuild from the pandemic.
Foran told ZB that they expected to add an additional 40,000 seats on the international network and 14 ports, however this rebuild would not be until the beginning of next year.
"It's just an equation of how long it takes to get things back online when they've been stored for a significant period," he said.