ASIA - How well low-cost carriers (LCCs) cope with rising fuel prices - either through hedging or boosting revenues - will determine which ones make it through the year with cash to spare. Budget airlines are especially vulnerable to higher jet fuel bills, which account for as much as 40%-45% of costs compared to a 27% industrywide share. The sector has grown so rapidly that about 23% of global airline seats are now on low-cost carriers. The Asia-Pacific region has the fastest growing LCCs as economic growth translates into air travel opportunities (JFI Feb.15,p1). Established regional carriers such as Tiger Airways, Jetstar and AirAsia are combating fuel-cost increases by boosting ancillary revenues - revenue from in-flight food or fees for checked baggage and choosing seats. "The cost of providing those ancillary services is often zero, or at least very cheap. All the expensive stuff - the fuel, the airplanes, the personnel - has to be covered in the ticket price," Tiger Airways CEO Tony Davis said at a recent LCC conference in Singapore. He pointed out that ancillary revenues are no longer optional, but have become essential to optimize profitability. Tiger showed a 20% year-on-year increase in ancillary revenues to $23 per passenger in the latest quarter. In the nine months ending December 2010, Tiger's fuel hedges have lost $300,000, while actual fuel costs totaled $162.2 million, about 38% of its expenses during the period. Rising fuel prices and increased capacity pushed operating expenses up by 27% over the same period.
展开▼
