Rising oil prices stall Virgin Australia’s bid to win passengers from Cathay Pacific and Qantas on Hong Kong routes
Upstart carrier that launched discounted fares to muscle in on Cathay Pacific and Qantas could see foray short-lived, as its CEO hints at higher costs
London-traded Brent crude came within a whisker of US$79 a barrel and oil in New York traded at US$75, threatening global airline profits as jet fuel costs make up a large portion of a carrier’s operating expense.
Virgin Australia CEO John Borghetti said rising oil prices were “not good” and conceded the carrier needed to consider increasing prices.
“I think all airlines are watching fuel very carefully and, in some cases, if not most, starting to contemplate what this means for pricing,” he added.
After posting losses for years, Virgin Australia in April began selling tickets at lower prices when oil was US$10 a barrel cheaper on both benchmarks ahead of its newest flight linking Sydney to Hong Kong. The route featuring discounted fares launched on Monday in a direct challenge to Cathay Pacific and Qantas.
Oil was at US$50 a barrel when the airline began its flights between Melbourne and Hong Kong at the same time last year.