British Airways selling tickets cheaper than the cost of fuel
Published: 01/08/08
With the long haul travel becoming increasingly competitive, British Airways are announcing that they may have to sell their tickets at a loss. The unprecedented move comes as increased fuel charges are set to make profits in the long haul industry next summer increasingly slim for nearly all of the major airlines.
One of the main reasons that the airline will start to struggle with the fuel costs come next summer is down to the lack of fuel hedge for the period. Fuel hedging allows them to pre pay for fuel and protects against unexpected price rises, however the amount of fuel they have paid for that period is only half what it normally is.
British Airways and many other airlines are also going to be hit by the assumption that business travel is going to decrease due to the budgets on international travel being cut in many investment banks. The news is slightly worse for BA as they are offering flights to Los Angeles for less than the price of fuel, tax and fees, never mind the additional cost of staff and aircraft upkeep.